(Bloomberg) — China is likely to report rapid economic expansion for the second quarter, though the underlying numbers will reveal a more difficult picture.
Most Read from Bloomberg
A comparison to last year, when Shanghai was experiencing a Covid-related lockdown, would make Monday’s GDP data look much better than it actually did. Gross domestic product is likely to grow 7.1% for the quarter year-over-year, up from 4.5% in the prior period, according to economists polled by Bloomberg.
Compared to the first quarter of 2023, it’s likely only up 0.8%. Monthly data for industrial production, retail sales and fixed investment – all due on Monday – are expected to show a marked slowdown in June. Retail sales growth, in particular, is likely to drop to 3.3% from 12.7% in May.
Economists focus on the latest numbers to get a fuller picture of China’s recovery. The signs have been disappointing so far: manufacturing activity is contracting, deflation is looming, export demand is falling, spending on the most recent holiday has been subdued.
Speculation grew that the People’s Bank of China would add more stimulus after a surprise rate cut in June. Officials indicated on Friday that more support may be on the cards, though it will likely be limited in scope and targeted at specific sectors, such as the real estate market and private companies.
Economists polled by Bloomberg all expect the People’s Bank of China to keep the interest rate on one-year policy loans unchanged at 2.65% on Monday, while some expect a small net infusion of funds.
What Bloomberg Economics says:
The People’s Bank of China (PBOC) wants to avoid adding too many stimulus too quickly. I have learned from experience that bursts of monetary easing can cause unwanted side effects.”
—For a full analysis from the Asia economics team at Bloomberg Economics, click here
Elsewhere, a pivotal UK inflation figure will help indicate the size of the next price move, retail sales take center stage in the US, and central bank decisions from Turkey to South Africa could provide some drama.
Click here for what happened last week and below is our summary of what is going to happen in the global economy.
United States and Canada
Tuesday’s retail sales figures highlight a busy week for US indices ahead of the Federal Reserve’s monetary policy meeting on July 25-26. Economists expect a healthy 0.5% advance for June sales which should add evidence of consumer resilience.
Buoyed by steady growth in employment and worker wages, household demand—during a cold snap—boosted the economy. A sustained increase should help reduce recessionary risks in the wake of the Fed’s aggressive rate hikes.
Residential construction, home sales and building sentiment data will provide a fresh read on the housing sector which is starting to stabilize.
Economists expect housing starts to decline in June after the biggest gains since 2016. Closings on existing home purchases are expected to ease as higher mortgage rates continue to weigh on the resale market.
On Tuesday, the Fed’s report is expected to show little change in factory output last month, highlighting a slowdown in the manufacturing sector.
The main event in Canada will be inflation data for June after the headline figure slowed to 3.4% in May. The main focus will be on two metrics that the Bank of Canada will track: average and average core rates, and service inflation. Their persistence above target contributed to Wednesday’s decision to raise interest rates to 5%.
New data on Canadian Existing Home Purchases and Retail Sales will show whether consumption remains strong despite higher borrowing costs.
Asia
While China will attract most of the attention, there is a lot going on in Asia.
G20 finance ministers and central bank governors are meeting in Gandhinagar, India, where they are likely to discuss the state of the global economy and debt relief amid division over Russia’s invasion of Ukraine.
Speaking in Gandhinagar before the meeting, US Treasury Secretary Janet Yellen said she was keen to build on recent improvements in US-China relations.
The head of the Bank of Thailand is due to brief on Wednesday after indicating earlier in the month that policy tightening will continue.
In New Zealand, where the central bank on Tuesday kept interest rates unchanged for the first time in nearly two years, quarterly inflation data is expected to show a further slowdown.
The Australian labor market has so far remained resilient to rate hikes, but any weakness in the jobs numbers on Thursday could signal the end of the policy tightening cycle.
Trade figures from Singapore, Indonesia, Japan and Malaysia will be closely watched to gauge the strength of global demand, although South Korea’s preliminary figures for July on Friday will provide the latest measure.
Japan’s national inflation figures, also due on Friday, could affect the outlook for the following week’s Bank of Japan meeting amid speculation that policy could be adjusted.
Europe, Middle East and Africa
UK inflation will be the highlight after the latest wages report indicated that price pressures are becoming entrenched.
While Bank of England Governor Andrew Bailey predicted that price growth would slow “significantly” in the second half, following the path seen in the US and parts of Europe, Wednesday’s report may show only limited progress. Any sign of stubborn core inflation will support expectations for a half point rate hike to match the previous move in June.
UK retail sales and deficit figures due on Friday will also inform investors about consumer resilience and the state of public finances.
In the Eurozone, the final reading of inflation for June will be released on Wednesday, followed on the same day by consumer confidence from across the region.
European Central Bank President Christine Lagarde is among policymakers speaking Monday at a conference on the economies of central, eastern and southeastern Europe.
There are few other public notes set in ahead of the blackout period kicking in on the Thursday ahead of the July 27th decision, in which a rate hike of about a quarter point was promised.
Turning east, Bulgaria may appoint central bank governor Dimitar Radev for another six-year term, as well as begin the procedure for appointing two deputy governors, a necessary step for the country to advance its bid for the eurozone.
Three major central bank decisions are set to be made elsewhere in the region:
-
The Bank of Russia may end its longest interest rate pause in more than seven years on Friday, with the prospect of raising borrowing costs to fight inflation.
-
On Thursday, Turkey’s central bank will make its second decision since President Recep Tayyip Erdogan’s re-election in May. After rising 650 basis points last month, traders will be watching to see if the Bank makes a similar move to counter inflation which is still running at around 40%.
-
On the same day, the RBA’s decision could prove to be a close call on whether officials will pause the sharpest phase of monetary tightening since 2006, or raise interest rates by 25 basis points. Market pricing shows traders betting on a 40% chance of such a rally.
South African data on Wednesday is likely to show that inflation in June returned to the Reserve Bank’s target range of 3% to 6% for the first time since April 2022.
latin america
There are headwinds, to be sure, but the Central Bank of Brazil’s survey of analysts and domestic proxy data for Brazil’s GDP published on Monday would once again remove reasons for optimism about Latin America’s largest economy.
Inflation expectations have fallen for eight consecutive weeks, growth expectations have risen for 12 consecutive weeks, and monthly production data has beaten analyst estimates for four consecutive months.
On Tuesday, local proxy figures for Colombia’s GDP could show a second consecutive contraction as the economy slows after 2022. Economists see growth slowing to 1.5% this year, down from 7.5%.
A light week in Mexico will see reports on international reserves, retail sales and a Banamex survey of economists.
Inflation just above target could keep Paraguay’s central bank hanging at 8.5% for the 10th consecutive month.
Activity in Argentina was hot and cold before a clear decline in April. Plenty of challenges — triple-digit inflation, a gathering recession, dollar shortages and investor anxiety about the potential for the financial system to explode in the midst of an election cycle — argue for another negative reading for May.
Argentina is widely expected to enter a recession this year; Economists surveyed by Bloomberg see the economy contracting by more than 3%.
– With assistance from Zoe Schnewes, Michael Winfrey, Robert Jameson, Paul Jackson, Laura Dillon Kane, Gilles Desis, Monique Vanek, Paul Wallace, and Vince Jules.
(Updates with the G20 in the Asia section)
Most Read by Bloomberg Businessweek
© 2023 Bloomberg LP
