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China is counting the cost of a blow to its economy, from a crackdown on the real estate market and an energy crisis to tight virus controls and soaring commodity prices.
The cumulative impact will show in the third quarter gross domestic product, expected on Monday, with growth expected to slow to 5% from 7.9% in the previous three months. Monthly industrial and investment data for the same day will further illustrate this picture, revealing the severity of power shortages last month.
China’s slowdown will spill over into Asia and the rest of the world, hitting commodity markets like steel and iron ore that depend on the country’s construction activity.
As Beijing tightens its grip on the property market as part of a larger effort to tackle financial risk, property sales and prices are already falling.
Meanwhile, a power shortage last month dampened output at the plant, pushing the purchasing managers index down enough to signal a contraction in manufacturing for the first time since the start of the pandemic – although the anticipated export orders for Christmas could have made up for some of that.
Beijing will likely still meet its modest annual growth target of over 6%, which means authorities may not be in a rush to inject stimulus. The People’s Bank of China on Friday refrained from injecting liquidity into the financial system, while asking lenders to keep lending to the real estate sector “stable and orderly.”
Premier Li Keqiang made a confident note in a speech on October 14, saying China has “met the challenges,” including severe flooding and a complex international environment.
“Growth stabilized a bit” in the third quarter, he said. “But for the whole year, we have the confidence and the ability to achieve our overall development goals. “
What Bloomberg Economics Says:
“China’s GDP data is likely to confirm a sharp deceleration in growth in the third quarter, as a confluence of shocks – delta-variant epidemics, acute energy shortages and tighter regulation – hit. the economy. “
–Chang Shu and David Qu. For a full analysis, click here
Elsewhere, Turkey could lower interest rates while Russia raises them, a new reading of British inflation could remain focused on the possible response of the Bank of England and the Federal Reserve will publish its beige book.
Click here to find out what happened over the past week and here’s our recap of what’s happening in the global economy.
Aside from Chinese economic data, Japan will likely be at the center of concerns as its general election campaign kicks off on Monday with a political debate among party leaders seeking to end what appears to be an inevitable victory for new Prime Minister Fumio Kishida. .
Japanese export figures on Wednesday are expected to offer the latest measure of how well the recovery in global trade is holding up amid supply chain bottlenecks. Friday’s inflation figures are expected to show the first price growth in Japan in 18 months, and a much stronger uptrend fueled by energy prices.
Also on Friday, Reserve Bank of Australia Governor Philip Lowe spoke to a panel on central bank mandates in discussions over a possible RBA review. Indonesia’s central bank is expected to keep interest rates unchanged at its meeting on Tuesday.
In the United States, traders are waiting for the latest data on industrial production, manufacturing and housing to judge the state of the economy.
For Fed watchers, the central bank’s beige book is due out on Wednesday and will provide an overview of businesses across the country.
Europe, Middle East, Africa
UK inflation on Wednesday is likely to have maintained its fastest pace in nearly nine years in September, with a reading of 3.2% expected. With investors betting in recent weeks on an imminent Bank of England tightening, this data will therefore be one of the most closely watched reports in the region.
Elsewhere, the next few days offer a final window for policymakers at the European Central Bank to express themselves on the future of stimulus measures before a period of pre-decision calm. Board members Fabio Panetta and Philip Lane, as well as board member Olli Rehn, are among those in charge who must share their views.
Governing Council member Klaas Knot said on Sunday that he expected interest rates to rise slightly once central banks begin to unwind their stimulus packages. Knot said the current rise in inflation is mostly transitory, echoing Saturday’s comments from ECB President Christine Lagarde.
In the Nordic countries, Riksbank Governor Stefan Ingves and Deputy Governor Martin Floden will address the Swedish parliament on Wednesday, while the Norwegian sovereign wealth fund – the world’s largest – will release third quarter results the following day.
Interest rate decisions will dominate economic news from the rest of the wider region, with seven expected this week.
Highlights include Turkey, whose central bank will hold its first meeting on Thursday since President Recep Tayyip Erdogan sacked three policymakers who were reluctant to cut rates, pushing the pound to record highs. This sets the stage for the bank to maintain its easing cycle after a surprise cut in its latest move, despite soaring inflation.
Meanwhile, on Friday, economists predict that Russia’s central bank will raise its interest rate by a quarter point as inflation does not slow, although expectations are rising that policymakers could go even further. , with a movement of half a point.
Here is a brief summary of other monetary decisions due in the region:
- Hungary’s central bank is set to hike interest rates for a fifth month, but is resisting pressure to accelerate tightening. It’s Tuesday.
- Mauritius’ central bank will likely leave its benchmark rate at an all-time low of 1.85% on Wednesday to support growth in the tourism dependent country.
- Also on Wednesday, Namibia is expected to keep its key rate unchanged to help the recovery.
- Ukraine’s central bank will reveal on the same day how it plans to deal with persistent inflation amid plans to keep borrowing costs unchanged this year.
- Botswana’s central bank could remain on hold on Thursday, estimating that inflation now above its 6% target range will start to fall back into the range
On Tuesday, look for data showing that the strong June-July activity in Colombia, which saw the economy return to its pre-pandemic level, continued into August. The IMF forecasts production of 7.6% for 2021, which would be the fastest since at least 1991.
The government of Argentine President Alberto Fernandez has increased its spending before the midterm of next month. Expect September budget results to be released on Wednesday to push the year-to-date deficit well above 500 billion pesos.
Mexico’s August retail sales figures on Thursday are likely to show some rebound given the record level in remittances during the month and the sustained rise in same-store sales. In Argentina, a subsiding pandemic and increasing mobility could fuel the June-July rise in Argentine GDP proxy data through August.
Mexico releases mid-month inflation data on Friday, the penultimate round of readings ahead of Banxico’s rate decision in November. Consistently high inflation has caused the central bank to rise divided in its last three meetings to 4.75% currently. Patience may run out, however, as the board speaks of “a more aggressive adjustment” to deal with the risk scenario ahead.
Closing the week, Brazil reported September’s current account and foreign direct investment figures on Friday.
(Updates with Knot, Lagarde comments in the Europe section.)
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