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Drought, global slowdown intensify risks, China's recovery falters

(Bloomberg) – China’s economy continued to recover in August, but there were warning signs on many fronts as drought and weak global demand added new risks to the growth outlook.

This is based on Bloomberg’s outlook for a composite index of eight early benchmarks this month. The overall indicator is 5, unchanged from July, indicating that momentum has stabilized.

Strong overseas demand for Chinese goods helped offset some of the damage to domestic spending from coronavirus lockdowns, but that demand weakened sharply in August. South Korea’s exports, a leading indicator of global trade, barely rose in the first few days of the month 000 compared to the same period last year.

The average daily shipment growth in South Korea was 0.5%, the weakest since the late period 500, and

Compared with the obvious slowdown .5%, up from the same period last month. The drop in Hong Kong’s exports in July also showed the impact of a cooling global economy, global interest rate hikes and the coronavirus outbreak on demand.

The outlook for China’s domestic economy is also not optimistic. The downturn in the property market extended into August, with sales continuing to plummet in China’s four largest cities. This comes despite months of government efforts to increase lending to homebuyers, lower mortgage rates and provide more flexibility for down payments.

The latest official data showed that property loan growth in July was the slowest since 2012 comparable data began. Mortgage rates may continue to fall to historic low of 4.1% after banks cut prime rates on five-year loans 20 Points earlier this week to boost housing demand.

Auto sales also rose well below July, another sign of weak domestic demand. Premier Li Keqiang pledged last week to maintain preferential policies aimed at boosting sales and stimulating demand for clean vehicles as part of efforts to support the development of the electric vehicle industry.

New economic headwinds this month, including a power crunch and the coronavirus outbreak, have hurt business confidence, especially among smaller companies. Standard Chartered’s survey of more than 100 several smaller companies showed a “significant slowdown” in production activity, weaker new orders and higher bank funding costs , confidence fell in August.

“Continued disruptions and power cuts caused by the novel coronavirus in some major production regions, including Sichuan, have resulted in temporary factory closures,” the firm’s economists Hunter Chan and Ding Shuang said. wrote in a report. “Disruptions in production and sales have led to rapid increases in raw material inventories and prices of finished goods.”

The Covid-19 outbreak continues to disrupt the usual peak season in some summer hotspots in China. The coastal city of Beihai only recently emerged from a month-long Block, exceed 100, tourists are stranded on the tropical island of Hainan due to the outbreak there, while Tibet has tens of thousands of tourists stranded in the region due to flight cancellations and roadblocks to contain infections.

Power shortages caused by the drought forced factories to shut down and malls to turn off lights, especially in cities in western China. Economists still expect a hit to industrial output in August, although the economic damage is expected to be smaller than last year’s power shortage.

Policy makers stepped up economic stimulus on Wednesday, mainly providing 1 trillion yuan 25 $100 million in funding is focused on infrastructure spending. Economists, however, are relatively pessimistic about the measures, saying they may not be enough to offset the damage from repeated coronavirus lockdowns and a sluggish housing market.

Early Indicators

Bloomberg Economics generates headline activity readings by aggregating a three-month weighted average of monthly changes in eight indicators based on business surveys or market prices.

  • Major domestic stocks – Shanghai and Shenzhen A-share CSI Index 100 ) Month).
  • The gross floor area of ​​housing sales in the four major first-tier cities in China (Beijing, Shanghai, Guangzhou and Shenzhen).
  • Steel bar stock for building reinforcement (in 000 , 000 metric tons). Falling inventories are a sign of rising demand.
  • Copper Price – Refined Copper Spot Price ) Shanghai Market (yuan/metric ton).
  • Korea Exports – Korea Exports No. 1 300 Number of days per month (year-on-year change).
  • Factory Inflation Tracker – China Producer Price Tracker (YoY change) created by Bloomberg Economics.
  • SME Confidence – Corporate Survey conducted by Standard Chartered Bank.
  • Passenger Car Sales – Monthly results based on weekly average sales figures published by the China Passenger Car Association.

©2022 Bloomberg LP

2022

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