China’s recovery is set to be ‘slow and bumpy’ in 2024
CHINA looks all but certain to hit its growth goal of about 5 per cent for 2023, shifting attention to whether deflation risks, the housing crisis and a lingering confidence crunch will derail efforts to build momentum this year.
Data due on Wednesday (Jan 17) will likely show China’s gross domestic product expanded 5.2 per cent for the entirety of last year, even as the economy probably lost some steam in the fourth quarter.
Retail sales and industrial output are also seen growing in December from a year earlier against a low base of comparison – in late 2022, the country was dealing with a massive Covid-19 outbreak.
The start of the year has brought mixed news. Figures on Friday showed China’s consumer prices falling in December for a third month, their longest deflation streak since 2009. Exports, though, are showing signs of stabilisation despite having dropped throughout 2023, a first since 2016.
“The domestic demand recovery will be slow and bumpy as targeted stimulus measures trickle through to investment sectors and the property recovery proceeds at a snail-like pace,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
The People’s Bank of China will have an opportunity on Monday to take action to counter deflationary pressures and boost lending. Economists surveyed by Bloomberg broadly expect the central bank to lower the rate on its one-year policy loans by 10 basis points to 2.4 per cent. They also see policymakers pumping more cash into the financial system.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
That likely will not be enough to fix things, though economists are expecting the central bank to take other steps to boost growth, such as cutting the amount of cash banks must keep in reserve. Fiscal support is also on the cards, with the nation’s finance minister having signalled that government spending will rise.
Societe Generale economists project Chinese economic growth of 4.5 per cent this year, based on the assumption of increased fiscal stimulus, a bit more monetary policy easing, stable export growth and support for the housing sector.
“If the Chinese government is willing to step up fiscal policy even more than we currently forecast, 5 per cent growth is likely,” Yao Wei, the bank’s chief economist and head of research for Asia Pacific, said at a briefing in Beijing last week.
Also in Asia, Indonesia’s central bank is likely to keep its interest rate unchanged on Wednesday, while Singapore’s exports for December are expected to log the biggest gain of the year. Australian data on Thursday may show that jobs growth slowed, and the Bank of Japan gets a last batch of inflation numbers days before its board meets.
Elsewhere, German GDP for 2023, United Kingdom reports on wages and consumer prices, multiple central bank speakers at the World Economic Forum in Davos, and United States retail sales will keep investors focused.
US and Canada
Retail sales data are the highlight of a holiday-shortened US trading week. The median projection in a Bloomberg survey of economists calls for a more moderate advance in purchases excluding auto dealers and petrol stations as 2023 drew to a close.
Combined with a robust November advance, though, the figures due on Wednesday should illustrate resilient consumer demand. Figures on housing starts and sales of previously owned homes are expected to show a residential real estate market that’s weak but stabilising.
The Fed on Wednesday will issue its industrial production report for December, which is expected to point to a weakened manufacturing sector. The central bank will also release its Beige Book summary of economic conditions across the US.
Fed governor Christoper Waller speaks on Tuesday on the economy and monetary policy, followed later in the week by regional Fed bank presidents Raphael Bostic of Atlanta and Mary Daly of San Francisco.
Meanwhile, the prospect of a US shutdown starting Jan 20 will continue to draw attention. Congressional leaders are working on a renewed stopgap spending agreement to keep the federal government funded into March.
In Canada, inflation data are expected to show a slight uptick to 3.2 per cent in December. The central bank will release quarterly business and consumer outlook surveys, and a glimpse of the slowing – but still pricey – real estate market will emerge with numbers on existing home sales and housing starts.
A deadline for businesses to repay pandemic-era loans will pass amid warnings that thousands of companies are at risk unless the government gives them more time. Retail sales data are also due.
Europe, Middle East, Africa
After December consumer-price data signalled resilient inflation pressure in the US and the eurozone, the focus this week is on the UK.
Wage figures on Tuesday will reveal how the country’s tight labour market is responding, while the underlying measure of inflation that strips out volatile elements such as energy is seen moderating only slightly below 5 per cent, still more than twice the central bank’s target.
Bank of England governor Andrew Bailey is likely to be quizzed on monetary policy when he makes an appearance before House of Lords lawmakers on Tuesday.
In the eurozone, meanwhile, industrial production data on Monday may point to further weakness in November that would make more likely the prospect that an overall economic contraction took hold in the fourth quarter.
Germany’s release of full-year GDP the same day may include an indication of how the region’s biggest economy fared at the end of the year, with the possibility that it suffered a shallow recession.
Multiple monetary officials will speak in Davos, the Swiss mountain resort where the World Economic Forum meeting takes place every January. Swiss National Bank president Thomas Jordan will be among them.
Three appearances by European Central Bank president Christine Lagarde are also scheduled there, though the scope of any comments may narrow as a blackout period before her institution’s Jan 25 rate decision kicks in on Thursday. An account of the December meeting will be published that day as well.
In the Nordics, Swedish inflation will be released on Monday and two Riksbank policymakers are scheduled to speak later in the week. Norwegian monthly GDP is due on Tuesday.
Looking south, the Bank of Angola on Friday may keep rates on hold or even hike for the second time in two months in a bid to rein in stubbornly high inflation. Annual consumer-price growth accelerated to 18.2 per cent in November.
Latin America
The so-called Focus survey of analysts from Brazil’s central bank gets the week rolling. Banco Central do Brasil’s success last year in getting consumer prices back inside their target range aside, inflation expectations remain unanchored, and policy normalisation is expected to be a long, deliberate process at best.
Brazil also serves up retail sales and GDP-proxy data for November, along with December job creation figures, which generally tumble as temporary holiday staff are let go.
In Peru, economy expanded 0.3 per cent in November from a year ago, the first time the economy has grown since April, according to data published over the weekend. Year-end unemployment in Lima, the country’s capital, likely pushed higher from November’s 6.6 per cent print.
In a light week for the Southern Cone, Argentina posts December and full-year figures for exports, imports and its trade balance, while Chile has nothing scheduled.
Colombia watchers can look forward to the central bank’s monthly survey of analysts, along with November reports on economic activity, industrial production, manufacturing and retail sales. BLOOMBERG
Share with us your feedback on BT's products and services
