China’s economic recovery is vulnerable to losing momentum as key trading partners from Japan to the U.S. struggle with resurgences of the deadly coronavirus and resort to fresh measures to control its spread.
While the world’s second-largest economy returned to growth in the second quarter amid relative success in containing the virus, much of that momentum relied on state-driven industry as consumers remain cautious.
“The Covid-19 situation continues to deteriorate in parts of the world,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “This may weaken demand for China’s goods and services and is a main risk facing China’s economy.”
Officials nodded at the global risks after a slew of data Thursday showed a steady but uneven recovery.
Gross domestic product expanded 3.2% in the three months to June from a year ago, reversing a 6.8% decline in the first quarter and beating the median forecast of 2.4%. Output in the first half was still down 1.6% on the same period in 2019.
In an indication of the mixed recovery, industrial output rose 4.8% in June from a year earlier — matching estimates — yet retail sales shrank 1.8%, much weaker than a projected 0.5% increase. At the same time fixed-asset investment shrank 3.1% in the first half of the year, versus a forecast drop of 3.3%.
Liu Aihua, spokeswoman for the National Bureau of Statistics in Beijing, told reporters that the continued spread of the virus globally will remain a key constraint on any domestic recovery.
“It is difficult to restart the world economy and trade,” she said, adding that “the recovery of domestic demand is restricted to a certain extent currently.”
To be sure, exports and imports both rose in June, signaling a firmer footing at home and abroad and which some analysts say points to an improving picture still to come.
“I think the economic recovery in China will continue in the next few quarters, even when export growth is facing some headwinds.” said Bo Zhuang, chief China economist at research firm TS Lombard.
Still, data on global growth continues to disappoint. The U.K. economy’s 1.8% expansion in May was much weaker than expected. While a ZEW gauge of current conditions in Germany improved in July, confidence for the next six months slipped. The Bank of Japan warned that the economy remains in an “extremely severe situation.”
Hopes for containing the virus are being strained as infections continue to spread around the world, including places like Australia and Hong Kong where it had been brought under control, pushing global cases above the 13.5 million mark.
Australia’s second most populous state — Victoria — recorded its biggest spike in coronavirus cases Thursday, a week after it was placed into partial lockdown as it’s gripped by a second wave of infections.
New Lockdowns
The virus continues to flare across the U.S., with Texas reporting a record Covid-19 deaths and almost 11,000 new cases, and California seeing near-record surges.
None of which bodes especially well for China, which needs export growth to return to a sustainable expansion.
Private and external demand are the two biggest sources of uncertainty for the second half of the year.
Private companies cut back on investment in the first six months while spending by state-owned firms saw a big jump in June, rising 2.1% in the first six months after falling 1.9% through May. Manufacturing investment was down almost 12%.
A drop in the surveyed jobless rate drew caution that the reading doesn’t capture the full labor market and that tens of millions may still be out of work due to the pandemic.
What Bloomberg’s Economists Say
China’s economy bounced back strongly in 2Q – but now the challenge will be to sustain the recovery. “Continued momentum in June production bodes well for growth in 2H. But weak consumer spending remains a serious, persistent drag.”
— Chang Shu and David Qu
See full note here
Simmering geopolitical tensions with the U.S. are another risk to both China’s exports and manufacturing investment, while the risk of a second wave of the virus cannot be ruled out.
“A bumpy and uneven reopening in other countries implies weaker external demand, which will likely become a drag on industrial activity growth in China,” said Helen Qiao, chief Greater China economist at Bank of America.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
