The Day at a Glance | Jul 15 2022

The Top

*China merely grew at an annual 0.4% rate in the 2Q22 (vs 1%e.).

*Retail sales in the United States increased more than expected during June (0.8% vs 0.3%e.).

*Christopher Waller, Governor of the FED, backs a 75bp interest rate increase in July.

*The number of Chinese citizens refusing to pay a mortgage has increased due to delays in delivery of homes and decreased prices.

*Industrial production figures in the United States are expected to be made public, forecasts estimate a standstill in June (0%e.).

Economic environment

Slow growth in China. China`s Gross Domestic Product merely increased an annual 0.4% during the 2Q22, figure below the analyst consensus estimate of 1%. Quarter to quarter, the economy receded (-) 2.6% (vs. -1.6%e.) due to confinement measures implemented in the country because of the new wave of COVID-19 infections in April and May; despite the fact that June`s data logged a firm recovery, especially regarding consumption (retail sales increased an annual 3.1% in June vs -0.3%e.). The GDP data confirms a strong slowdown in China`s economy and suggests that it will be difficult to reach the country`s 5.5% growth target, which was established by the Communist Party for 2022. After the figures were made known, estimates for China`s growth started being revised downwards – even below 4%. And growth logged in the 2Q22 is the second slowest since 1992, when China started using the data series – only behind a (-) 6.9% contraction logged in the 1Q20. During the first semester of 2022, growth in China set at 2.5% annual, which implies that it`s necessary for it to log a 7.5% rate of growth in the second half of the year in order to reach the target. But the future of China`s economic recovery is quite uncertain: Xi Jinping remains committed to a “zero COVID” policy even with low vaccination rates among senior adults; foreign demand faces weakness as less accommodative monetary policies around the world seek to halt inflationary pressures; and the real-estate sector`s crisis continues to deepen, with banks and stocks of developers logging their lowest levels – even below those seen during last November, and citizens suspending they mortgage payments, with risks of affecting the banking and financial systems. Authorities have announced increases in infrastructure investment in an attempt to stimulate growth, but the central bank has remained far from decreasing interest rates (to keep the Yuan stable). Domestic consumption, for its part, still faces risks due to new outbreaks of the virus in July.

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