The third week of July 2023 kicked off with a key economic release from China, the world's second-largest economy. It is no secret that with China being one of the world’s biggest economies, its data can affect both the Asian markets and global markets alike, which is exactly what happened following the release.
However, while China’s economic data was already published, it is important to keep in mind that the week is yet to be over as other major economic reports await us. From China’s GDP summary to the Eurozone’s and UK’s upcoming CPI releases, here is what you should know about this week’s economic data:
China’s GDP: Is the World’s Second-Biggest Economy Lagging?
China’s economy may have already been under the radar in the past couple of months as investors and analysts alike, attempted to gauge its performance following the lift of COVID-19 restrictions. As such, while many may have expected China to recoup its COVID losses and rise from the ashes, the recent economic data may suggest otherwise.
On Monday, July 17th, China's Q2 GDP figures were released and may have indicated that the world’s second-biggest economy still has some more time left to recoup its COVID lows. Accordingly, the GDP, which is a measure of the total monetary or market value of a country’s finished goods and services, showed that China’s GDP fell short of expectations as it grew by only 0.8% compared to its Q1’s 2.2% rise and grew by 6.3% YoY in Q2.
The sluggish growth may be attributed to a record rise in unemployment rates among China’s youth, slow post-COVID economic recovery, and uncertainty in the Chinese property markets among other factors. Some analysts even commented that “after a sugar injection in the opening months of 2023, the pandemic hangover is plaguing China’s recovery” which is “a worrying result for an economy that’s struggling to gain momentum.”
Nonetheless, despite these less-than-stellar figures and outlooks, the National Bureau of Statistics (NBS) representative claimed that the data actually shows China’s return to pre-COVID normalcy and that it is experiencing some of the best economic recoveries in the world. However, he also admitted that the youth unemployment rate, which is one of the country’s biggest problems currently, may be induced in the months to come due to the fact that more and more college students are graduating this year.
How Are the Markets Reacting to the Chinese Data?
Since China is known for being the world’s largest Oil (CL) importer, it may not come as a surprise to learn that yesterday’s underwhelming GDP release has sent ripples across the energy commodities market.
Accordingly, Oil fell 1.5% on Monday but is slightly up by 0.09% as of the time of the writing on Tuesday, July 18th.
Despite this drop, it may be important to note that recent trade data actually showed that China’s crude imports are still relatively solid. On the other hand, the country’s fuel demand may be dropping amidst weakening manufacturing activity.
In addition, the Chinese data may have also pushed Asian stocks downward. Hong Kong’s Hang Seng (Hong Kong 50) index fell about 2% and was Tuesday’s worst Asian performer. Chinese tech stocks were also affected. Beyond the Asian landmass, the Chinese data can also have an impact on European markets as one economist noted that “Europe and European equities are quite sensitive to what is happening in China,” and that “if China continues to disappoint, the market which is going to pay the price is probably going to be Europe instead of the US.” (Source: Bloomberg)
United States Secretary of the Treasury, Janet Yellen also commented on the data in a Bloomberg TV interview by saying that “many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States.” This, in turn, can only highlight China’s economic prowess and impact.
Traders will have to wait and see what other possible impacts the latest Chinese revelations may have on the economy and global markets.
Other Key Releases: CPI, Jobless Claims, and More
The week is far from over as releases from the US, the Eurozone, the UK, and Japan are scheduled and traders may want to keep track of them for any more economic clues.
As such, the Eurozone’s and the UK’s CPI releases are scheduled for Wednesday and Japan’s CPI is scheduled for Friday. Since CPI is an important measure of inflation and deflation, its results can provide valuable insights into the state of the global economy, in general, and these countries’ economies in particular.
In the Eurozone, a preliminary estimate shows that June 2023’s inflation rate has declined to 5.5% which is below May’s 6.1%, and the lowest rate since January 2022. However, it is still above the ECB’s 2% target rate.
Likewise, the inflation rate is also expected to show a drop in the UK. This is because the headline inflation rate there is expected to have dropped to its lowest level since March 2022 as June’s inflation is believed to have dropped from 8.7% to 8.2%. If these predictions materialize, then the expectations regarding hawkish Bank of England (BoE) hikes may cool down a bit.
Other releases traders may want to keep an eye out for are Japan’s CPI release and the UK Retail Sales on Friday and the US Retail Sales on Tuesday.
In conclusion, this week may be an eventful one as key economies are expected to show how they have fared recently and how they have faced global economic headwinds ranging from inflation to recession fears and uncertainties.