China’s economic woes deepen as the housing market slumps

(Bloomberg) — China’s economy shows little sign of recovery, with new pressures in the real estate market and downturn threatening growth prospects.

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Official data on Tuesday is likely to show modest gains in industrial production, retail sales and fixed-asset investment in July last year, although growth rates remain well below pre-pandemic levels.

Real estate investment likely contracted further, with confidence shaken by defaults by a major developer and home sales continuing to decline as well.

Adding to the gloom, heavy rains and deadly floods last month in the southwest and more recently in northern China likely hampered construction and infrastructure projects, curbing economic activity.

The figures come on the heels of last week’s economic news which showed the arrival of deflation in July as manufacturers and retailers slashed prices in an effort to attract buyers and move excess inventory. Exports and imports also fell more than expected, while consumer and business borrowing declined.

Beijing has made numerous pledges and announced additional measures to support growth, but has avoided the kind of monetary and fiscal stimulus implemented during previous recessions. The weaker yuan and high debt levels prompted more caution.

The government has also set a rather conservative growth target of around 5% for the year, which remains on track even without significant stimulus. The People’s Bank of China is likely to keep its main policy rate unchanged at 2.65% on Tuesday, according to economists polled by Bloomberg.

What Bloomberg Economics says:

The economy needs more support. We see the central bank delivering in the third quarter by freeing up more liquidity for banks to lend and reducing borrowing costs further.”

—For the full analysis, click here

Elsewhere, US data may show resilience in consumer demand, UK wage and inflation figures will prompt investors to bet on a future rate hike by the Bank of England, and Japanese growth statistics will also be released.

Click here to find out what happened last week, and here is our summary of what is going to happen in the global economy.

United States and Canada

On the heels of last week’s reports showing inflation was moderate, fresh snapshots of retail demand, home construction and factory production will set the tone for the economy at the start of the third quarter.

In addition, the Federal Reserve on Wednesday will deliver minutes from its July policy meeting, where officials raised interest rates a quarter of a percentage point to their highest level in 22 years. Investors will measure the account for evidence of a desire for more hikes, although the odds favor a halt in September.

Tuesday’s report is expected to show retail sales rebounded in July. Resilience in consumer demand, supported by a still healthy labor market, would confirm views that the economy has room to avoid a recession.

The next day, separate data may show an increase in new home construction in July as builders respond to weak inventories in the resale market. The increase in starts for single-family homes will be the fifth in the past six months.

While housing shows signs of stabilizing, manufacturing is struggling for momentum. The Fed report is expected to show that factory production didn’t change much last month after two months of decline.

Turning north, Statistics Canada will release inflation data for July, after the consumer price index slowed to 2.8% in June. It was the first time in two years that it was within the control of the Bank of Canada.

Asia

Outside of China, Indian data on Monday will reveal whether inflation accelerated in July.

Japanese figures on Tuesday are expected to show continued economic expansion in the second quarter, while price data on Friday is expected to show that inflation remained well above the Bank of Japan’s target in July.

Also on Tuesday, the Reserve Bank of Australia will release the minutes of its August meeting, where it kept interest rates steady, ahead of new labor statistics on Thursday which could show a slowdown in employment growth.

In neighboring New Zealand, which just saw its first monthly decline in food prices since early 2022, the central bank is expected to hold interest rates steady on Wednesday, while the Philippine central bank is expected to hold steady on Thursday.

Malaysia unveiled its second-quarter GDP statistics on Friday.

Europe, Middle East and Africa

After news of the resilience of the British economy in the second quarter, the new data will help determine the Bank of England’s intention to enact further rate hikes, with key reports due in the first two months ahead of the September 20 decision.

Tuesday’s wage numbers will show the extent to which higher prices are feeding on self-reinforcing wage pressures. Then, Wednesday’s inflation data for July is likely to reveal a significant slowdown, although the underlying measure that strips out energy and other volatile items has barely budged.

In the eurozone, the week will be interrupted in several countries – including France and Italy – by holidays on Tuesday.

Aside from German investor confidence that day, traders may focus on possible revised readings of Eurozone GDP and inflation, on Wednesday and Friday respectively, which will show whether recent data – for example, a drop in industrial production in Germany – restates. The general picture is an economy.

In the Nordic countries, Tuesday’s Swedish consumer prices report will draw attention, as the Riksbank remains committed to tightening even as evidence of its impact on the economy becomes increasingly clear.

On Thursday, Norway’s central bank may raise interest rates by a quarter point in its latest decision, after slowing growth in core consumer prices relieved pressure on policymakers to take a bigger step.

Turning south, investors will find out on Tuesday whether inflation in Israel slowed for a third month in July. That may make the Bank of Israel – which recently said it may not raise interest rates – less inclined to further tighten policy.

On the same day, Nigerian data is likely to show that inflation has picked up beyond the 22.8% level in June, spurred by the removal of fuel subsidies and the depreciation of the naira.

In Uganda, monetary officials are expected to stand by for their fifth meeting after the inflation rate fell below the central bank’s 5% target in the past two months. Two days later, on Thursday, Rwanda is also likely to keep rates on hold.

latin america

Data on manufacturing, industrial production and retail sales for June released this week should confirm the significant slowdown in the Colombian economy.

Quarter-on-quarter output likely fell for the first time since 2021 in the three months through June, while the annualized result and June GDP reading stalled.

Chile’s central bank, led by Prime Minister Rosana Costa, turned heads by kicking off the easing cycle with a larger-than-expected 100 basis point cut last month, so the minutes of the meeting scheduled for Monday will be a must-read for Chile watchers.

Banco Central de Chile will also publish its merchant survey along with its production report for the second quarter, which is widely expected to show a moderate contraction as mining activity disappointed in the first half.

Data published in Peru this week may show that unemployment in Lima fell for a fourth month in July.

Finance Minister Alex Contreras said this month that GDP proxy data is likely to show a decline in output in June, meaning the economy posted consecutive quarterly contractions in the first half of 2023.

In Argentina, the July consumer price report is likely to show an 18th consecutive year of increase from the June reading of 115.6%.

The central bank, which raised its key interest rate to 97% in May, often follows up inflation data with monetary policy announcements.

– With assistance from Nasreen Syria, Vince Jules, Paul Jackson, Monique Vanek, Paul Wallace and Robert Jameson.

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