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China’s April data show economic recovery losing steam, testing policymakers

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China’s April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter and intensifying pressure on policy-makers to shore up a wobbly post-COVID recovery.

Tuesday’s batch of data, which also showed a further decline in property investment, adds to concerns about the outlook for the world’s second-biggest economy as both its domestic and export engines of growth remain underpowered.

Industrial output grew 5.6% in April from a year earlier, accelerating from the 3.9% pace seen in March, data released by the National Bureau of Statistics (NBS) showed. It was well below expectations for a 10.9% increase in a Reuters poll of analysts although it marked the quickest growth rate since September 2022.

Retail sales, a gauge of consumption, jumped 18.4%, up sharply from a 10.6% increase in March for their fastest increase since March 2021. Analysts had expected 21.0% growth.

The year-on-year figures were heavily skewed by contractions last April when the financial hub of Shanghai and other major cities were under stringent anti-virus lockdowns and curbs, which severely impacted growth in the Asian giant in 2022.

“Today’s weaker-than-expected data show how difficult it is to keep the growth engine running after restarting it,” said Bruce Pang, chief economist at Jones Lang Lasalle.

Nomura economists took an even dimmer view: “As disappointment kicks in, we see a rising risk of downward spiral, resulting in weaker activity data, rising unemployment, persistent disinflation, falling market interest rates and a weaker currency.”

“Year-over-year growth in Q2 may still look elevated, thanks to a low base, but sequential growth could experience a material decline,” they said.

Indeed, other data over the past week showing shrinking imports in April, deepening factory gate deflation and worse-than-expected bank loans signalled weak domestic demand, raising pressures on policy-makers to shore up the economic recovery as global growth falters.

China’s central bank kept the interest rate unchanged on Monday as expected, but markets are betting on more monetary easing in the coming months as the commodities data also highlighted pockets of weakness across the economy.

The country’s average daily coal production, aluminum output and crude steel output all fell in April from a month earlier.

Zhou Hao, economist at Guotai Junan International, expects the central bank to cut interest rates “as economic downturn pressure still remains.”

China’s cabinet in late April unveiled plans to boost employment and trade as the government tries to meet its modest growth target of about 5% in 2023, after badly missing last year’s goal.

The offshore Chinese yuan weakened towards a two-month low while the Aussie dollar flipped from early small gains to a loss after the discouraging data.

On top of the broad demand woes, Chinese policy-makers have to contend with headwinds from recent Western bank failures, rising global borrowing costs, high domestic debt and the Ukraine war.

The data also showed fixed asset investment expanded 4.7% in the first four months of 2023 year-on-year, slowing from the 5.1% pace in the January-March period.

Private fixed-asset investment rose only 0.4%, a sharp contrast to the 9.4% jump in investment by state entities, indicating weak business confidence.

Investment in the property sector, a key pillar of the economy, tumbled 16.2% year-on-year last month after a 7.2% drop in March, according to Reuters’ calculations based on official data, as investors remain cautious due to still-fragile demand.

Hiring was still low among companies wary about their finances. The youth jobless rate hit a record high at 20.4%, up from 19.6% in March, which Zhiwei Zhang, chief economist at Pinpoint Asset Management, described as a “worrying sign.”

“With China now out of the sweet spot of reopening, hope of further sentiment repair could be diminishing in the absence of decisive government actions,” Citi economists said in a note.

“We reckon that policy-makers need to move from the wait-and-see mode to pro-active easing and expect 20bps policy rate cut in the remainder of the year.”

 

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Mark Carney to lead Liberal economic task force ahead of next election

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.

Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.

The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.

“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.

Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.

Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.

Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.

All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.

Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.

Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.

Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.

Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.

Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.

But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.

The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.

While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”

Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.

“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.

“It’s the same failed Liberal policies causing the same hardships for Canadians.”

He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.

The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.

This report by The Canadian Press was first published Sept. 9, 2024.

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

Here’s a quick glance at unemployment rates for August, by province

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OTTAWA – Canada’s national unemployment rate was 6.6 per cent in August. Here are the jobless rates last month by province (numbers from the previous month in brackets):

_ Newfoundland and Labrador 10.4 per cent (9.6)

_ Prince Edward Island 8.2 per cent (8.9)

_ Nova Scotia 6.7 per cent (7.0)

_ New Brunswick 6.5 per cent (7.2)

_ Quebec 5.7 per cent (5.7)

_ Ontario 7.1 per cent (6.7)

_ Manitoba 5.8 per cent (5.7)

_ Saskatchewan 5.4 per cent (5.4)

_ Alberta 7.7 per cent (7.1)

_ British Columbia 5.8 per cent (5.5)

This report by The Canadian Press was first published Sept. 6, 2024.

The Canadian Press. All rights reserved.

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