Connect with us


Soaring Inflation and Crashing Home Sales: Coronavirus Devastates China’s Economy –



  • China’s real estate market is showing signs of collapse as the spread of coronavirus intensifies.
  • Inflation is surging as the disease disrupts businesses and supply chains.
  • A government researcher says the economic impact of coronavirus could shave as much as 1 percentage point from full-year GDP growth.

Coronavirus is wreaking havoc on the Chinese economy: Inflation surged in January, home sales plunged in the first week of February and GDP growth is expected to be 1 percentage point lower in 2020.

As the true cost of Beijing’s coronavirus cover-up adds up, the Communist Party is quietly ‘removing’ senior officials over their mishandling of the epidemic.

Home Sales Plunge

China home sales
China’s housing market experienced a dramatic drop in the first week of September. Shenzhen apartment sales were among the hardest hit. | Image: REUTERS/Bobby Yip

The first week of February was particularly grim for Chinese real estate. New apartment sales dropped a staggering 90% from the same period a year ago, according to data on 36 cities collected by China Merchants Securities Co.

The resale market was also hit hard: Existing home sales plunged 91% in eight cities where data are available.

Even before the outbreak, housing was already on the back foot as government officials adopted measures to curb over-lending and runaway price growth. As Bloomberg reports, Chinese real estate is on course to experience a bigger drop than during the 2003 SARS pandemic.

Shenzhen has reportedly banned all forms of home sales over the rise of infections in the sub-provincial city. Shenzhen’s metro region is home to more than 23 million people.

While some analysts expect home sales to pick up later this year, citizens in quarantined zones have seen their incomes decline. Lockdowns impact as many as 400 million Chinese citizens.

Inflation Surges

Coronavirus has disrupted businesses and supply chains as residents flocked grocery stores to load up on essential supplies. The result has been a massive uptick in inflation.

On Monday, the National Bureau of Statistics reported that China’s consumer price index surged 5.4% annually in January, the highest in eight years. Compared with December, consumer prices spiked 1.4% after flat-lining the month before.

Analysts at Nomura believe CPI inflation will remain comfortably above 4% annually through the first half of 2020.

Factory-gate inflation also rose in January from a year earlier, snapping six months of year-over-year declines. The producer price index (PPI) edged up 0.1% annually after falling 0.5% in December.

China’s Shrinking GDP Growth Revised Even Lower

Speculation that coronavirus will lead to a worldwide recession have echoed loudly in recent weeks as the number of infected countries reached 27. As the data on home sales and inflation showed, China’s economy is already suffering.

On Monday, a senior member of the Chinese government attempted to quantify the extent of that suffering.

Zeng Gang, vice chair of the National Institute for Finance and Development, says coronavirus will shave 1 full percentage point off China’s economic growth this year.

He said, as per Reuters:

At present, according to different scenario assumptions, researchers expect the negative impact of the epidemic on full-year GDP growth to be in the range of 0.2% to 1%.

China’s economy is already growing at its slowest pace in almost 30 years. Last month, the International Monetary Fund (IMF) called for the continuation of that trend. In its biannual World Economic Outlook publication, the Fund forecast China’s gross domestic product (GDP) to expand 6% in 2020.

If Zeng’s forecast is correct, Chinese GDP growth could slow to around 5% this year.

Official reports place global coronavirus infections at around 43,200, with the vast majority concentrated in mainland China. Some researchers think the official numbers are being suppressed by the Chinese government in a desperate attempt to control the narrative. Ironically, state censorship may have enabled the outbreak to spread.

This article was edited by Josiah Wilmoth.

Let’s block ads! (Why?)

Source link

Continue Reading


Canadian retail sales slide in April, May as COVID-19 shutdown bites



december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

Continue Reading


Canadian dollar notches a 6-day high



Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

Continue Reading


Toronto Stock Exchange higher at open as energy stocks gain



Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

Continue Reading