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(Bloomberg) — China looks all but certain to hit its 2023 growth target of about 5%, and all eyes will be on whether deflation risks, the housing crisis and a lingering contraction in confidence will derail efforts to build momentum this year. It’s moving.
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Figures to be released on Wednesday will likely show that China’s gross domestic product expanded by 5.2% over the whole of last year, even though the economy lost some momentum in the fourth quarter.
Retail sales and industrial production in December are also seen to have increased compared to the same month last year, despite the lower comparison basis. In late 2022, the country was dealing with the coronavirus disease (Covid-19) pandemic.
The beginning of this year brought a lot of news. China’s consumer prices fell for the third consecutive month in December, the longest period of deflation since 2009, data showed on Friday. However, exports are showing signs of stabilizing, despite declining throughout 2023 for the first time since 2016.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said: “The recovery in domestic demand will be slow and bumpy as targeted stimulus trickles into the investment sector and the real estate recovery moves at a snail’s pace. It will be,” he said.
The People’s Bank of China will have an opportunity on Monday to take steps to counter deflationary pressures and expand lending. Economists surveyed by Bloomberg generally expect the central bank to cut the one-year policy lending rate by 10 basis points to 2.4%. They also see policymakers injecting more money into the financial system.
That probably won’t be enough to resolve the situation, but economists expect the central bank to take other steps to boost growth, such as reducing the amount of cash banks have to hold. are doing. The country’s finance minister has indicated that government spending will increase, and fiscal support is also planned.
Bloomberg Economics says:
“We expect the People’s Bank of China to start the week with a rate cut on Monday. Recent data has been on a weak trend, giving us plenty of reason to increase support. Another shocking statistic to be released on Wednesday. , fourth-quarter GDP and economic activity in December will likely highlight a softer picture.”
—For complete analysis, click here and here
Economists at Société Générale SA expect China’s economy to grow by 4.5% this year, given stronger fiscal stimulus, a little more easing of monetary policy, stable export growth and support for the housing sector. .
“If the Chinese government is willing to tighten fiscal policy even further than we currently expect, then the 5% It looks like there will be a growth rate.”
Elsewhere in Asia, Indonesia’s central bank is likely to keep interest rates on hold on Wednesday, with Singapore’s December exports expected to post their biggest rise this year. Australian data on Thursday could show job growth slowing, with the Bank of Japan getting its final inflation figures days before the board meeting.
Other news that will attract investors’ attention include Germany’s GDP in 2023, a report on UK wages and consumer prices, speeches from several central banks at the World Economic Forum in Davos, and US retail sales figures.
Click here to find out what happened last week. Below is a summary of what will happen next in the global economy.
USA and Canada
Retail sales statistics will be the highlight of a holiday-shortened US business week. The median forecast in a Bloomberg survey of economists is that purchases, excluding auto dealers and gas stations, will move more slowly as 2023 draws to a close.
However, when combined with November’s strong growth, the numbers released on Wednesday will demonstrate the resilience of consumer demand. Housing starts and existing home sales are expected to show that the residential real estate market is weak but stabilizing.
The Federal Reserve will release its industrial production report for December on Wednesday, which is expected to highlight weakness in the manufacturing sector. The central bank will also release the Beige Book, which summarizes the economic situation across the United States.
Fed President Christoper Waller will speak on the economy and monetary policy on Tuesday, followed later in the week by Regional Fed President Rafael Bostic in Atlanta and President Mary Daley in San Francisco.
Evaluation of US economic activity
In Canada, December inflation data is expected to rise slightly to 3.2%. The central bank plans to release a quarterly survey of business and consumer outlooks, and existing home sales and housing starts will provide a glimpse into a slowing but still expensive real estate market.
The deadline for pandemic-era business loans to repay is coming to an end as thousands of businesses are warned that they will be in jeopardy unless the government gives them more time. Retail sales data will also be submitted.
Europe, Middle East, Africa
The focus this week is on the UK, after consumer price data for December showed inflationary pressures in the US and eurozone are picking up.
Tuesday’s wage data will shed light on how the country’s tight labor market is responding, while the underlying measure of inflation, which excludes variables such as energy, is expected to remain just below 5%. , still more than double the central bank’s target.
Bank of England Governor Andrew Bailey will appear before members of the House of Lords on Tuesday and is likely to be questioned about monetary policy.
Meanwhile, in the eurozone, Monday’s industrial production data could point to further weakness in November, making the prospect of an overall economic contraction taking hold in the fourth quarter more likely.
Germany’s full-year GDP figures released on the same day could provide an indication of how the region’s largest economy fared at the end of the year, with the possibility of it slipping into a shallow recession.
Several financial officials will give speeches at the Swiss mountain resort of Davos, where the World Economic Forum is held every January. Thomas Jordan, the president of the Swiss National Bank, is one of them.
European Central Bank President Christine Lagarde is also scheduled to make three appearances, but the scope of her comments may be limited during a blackout period before the bank’s Jan. 25 interest rate decision begins on Thursday. be. The report of the December meeting will also be published on the same day.
In Scandinavia, Sweden’s inflation figures will be released on Monday, and two Riksbank policymakers are scheduled to speak later this week. Norway’s monthly GDP will be released on Tuesday.
Looking further, the Bank of Angolan may leave interest rates unchanged on Friday, or raise them for the second time in two months, in a bid to curb persistently high inflation. The annual growth rate of consumer prices accelerated to 18.2% in November.
latin america
The week begins with a so-called focus survey of analysts at Brazil’s central bank. Aside from Brazil’s central bank’s success in bringing consumer prices back within its target range last year, inflation expectations remain unanchored and policy normalization is expected to be a long and cautious process at best. Ru.
Brazil will also release proxy data for retail sales and GDP for November, as well as job creation statistics for December, although these numbers typically decline as furloughed employees are laid off.
In Peru, GDP proxy data for November is likely to show that the slight month-on-month expansion in October has stalled. According to a survey of economists conducted by Bloomberg, production is expected to decline by 0.4% in 2023. The year-end unemployment rate in the capital Lima is likely to rise further from November’s 6.6%.
In a quiet week for the Southern Cone, Argentina will release December and full-year figures on exports, imports and trade balance, while nothing is scheduled for Chile.
Colombia watchers will be looking forward to the central bank’s monthly survey of analysts, along with November’s report on economic activity, industrial production, manufacturing and retail sales.
–With assistance from Robert Jameson, Brian Fowler, Piotr Skolimovsky, Laura Dillon Cain, Vince Gaul, and Enrique Almeida.
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