The Day at a Glance | January 17 2022

The Top

*China grew 1.6% (5% annual) during the 4Q21; and grew 8.1% in 2021, its fastest pace of growth since 2011.

*The People`s Bank of China cut interest rates in order to back growth.

*The United Kingdom`s economy recovered pre-pandemic levels during November.

*Central Bank in Japan will hold a meeting today; it may steer its monetary policy communications in light of increasing inflation.

Economic environment

China`s economy slowed down less than estimated in the 4Q21. The world`s second largest economy`s most recent growth figures confirmed a slower than expected slowdown at the end of 2021. According to official figures, the economy expanded 1.6% quarter over quarter (vs. 1.1%e.) and 4% annual during the 4Q21 (vs 3.6%e.). Despite the positive surprise, this is the slowest pace of growth since the 2Q20, which confirms weakness in the economy. Investment (4.9%) and industrial production (4.3% annual) accelerated more than expected in December and contributed to the surprisingly positive 4Q21 figures; however, most of the disappointment came from retail sales, which barely increased 1.7% (vs 3.7%e.). Weakness in the real-estate sector also persists, after a (-) 17% monthly (-14% annual) fall was logged in property investments, a 19.6% annual drop was logged in house prices (December was the sixth consecutive month in which a decrease was recorded), and financing in the sector fell (-) 19.3% annual during December (the largest decrease in 7 years). In light of these circumstances, the People`s Bank of China decided to cut one-year loan rates to financial institutions in 10 base points to 2.85%; the central bank`s buyback program`s rate was also cut in 10 bp to 2.1%. The central bank is expected to continue easing its monetary stance during the first half of 2022 in order to back growth and counter the slowdown. Lastly, China`s growth set at 8.1% in 2021, level way above the 6% target, and was boosted by a low base comparison in 2020 and an exceptional performance by exports throughout the year. This is the economy`s fastest annual pace of growth since 2011.