Tuesday May 16, 2023: $172.07 $0.00 0.00%
May 16, 2023 1:05:23 GMT -8
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Post by Dave on May 16, 2023 1:05:23 GMT -8
Good morning and we start this trading day with a green pre-market at +0.10% at this moment.
China’s Waning Economic Recovery Spurs Calls for Stimulus
Official data Tuesday showed industrial output, retail sales and fixed investment grew at a much slower pace than expected in April. The figures were disappointing even though the low base of comparison from last year, when Shanghai was in lockdown, helped to boost the data.
A major worry was the jump in the unemployment rate for young people to a record high of 20.4%, a sign that the post-pandemic recovery isn’t strong enough to absorb the millions of new entrants to the labor market.
The data confirms signals from other recent indicators showing the recovery is waning. The property market remains weak despite early signs of a pickup in housing sales, inflation is close to zero and consumers are reluctant to borrow.
Economists say more policy action will be needed to keep the recovery going, although central bank steps alone won’t be enough to boost consumer and business confidence.
“Policy support is important, but the question is, which policy stimulus is most important,” Haibin Zhu, chief China economist at JPMorgan Chase & Co. said in an interview with Bloomberg TV. “Industry policy probably will play a more important role, then fiscal stimulus, particularly on the consumption stimulus.”
“Monetary policy can play a supplementary role, but honestly, a rate cut is not the most urgent response,” he said.
Chinese stocks closed 0.5% lower on Tuesday as Asian shares broadly gained. The onshore yuan weakened 0.17% to 6.964 per dollar as of 3:05 p.m. local time.
There were several warning signs in Tuesday’s data pointing to a faltering recovery. Property investment contracted 16.2% in April from a year earlier even though home sales grew, according to Bloomberg calculations based on official data. Construction of new homes continued to decline.
Output of key commodities used in construction, like aluminum and steel, fell in April from the previous month.
The People’s Bank of China hinted on Monday it will maintain a supportive policy, prompting some economists to predict it could take stronger action in coming months, including lowering the reserve requirement ratio or cutting interest rates. Tuesday’s data added to those calls.
“Consumption remained solid, yet the spike in youth unemployment to a record high raises questions about how sustainable that recovery can be,” said Michelle Lam, Greater China economist at Societe Generale SA. “Today’s data opens the door for further cuts in the reserve requirement rate and interest rates, possibly in June.”
The PBOC has refrained from aggressive rate cuts in recent years, preferring targeted stimulus measures instead. In a special section of its policy report on Monday, the PBOC said it has stuck to the so-called “attenuation principle” when making rate decisions, which means choosing a middle way, or relatively cautious approach toward rate decisions.
Zhang Yu, chief macro analyst at Huachuang Securities, said the PBOC’s report suggest chances for a rate cut are declining, but a reduction in the RRR is still possible in order to replenish liquidity.
Tuesday, May 16
Home Depot (HD), Sea Limited (SE), Baidu (BIDU), Vodafone Group (VOD), Keysight Technologies (KEYS), and Tencent Music Entertainment Group (TME) report earnings
U.S. Retail Sales (Apr)
Industrial Production (Apr)
Business Inventories (Mar)
Retail Inventories (Mar)
NAHB Housing Market Index (May)
Euro Area GDP Growth Rate - Second Estimate (Q1 2023)
Japan GDP Growth Rate - Preliminary Estimate (Q1 2023)
Canada Inflation Rate (Apr)
Home Depot (HD), Sea Limited (SE), Baidu (BIDU), Vodafone Group (VOD), Keysight Technologies (KEYS), and Tencent Music Entertainment Group (TME) report earnings
U.S. Retail Sales (Apr)
Industrial Production (Apr)
Business Inventories (Mar)
Retail Inventories (Mar)
NAHB Housing Market Index (May)
Euro Area GDP Growth Rate - Second Estimate (Q1 2023)
Japan GDP Growth Rate - Preliminary Estimate (Q1 2023)
Canada Inflation Rate (Apr)
China’s Waning Economic Recovery Spurs Calls for Stimulus
Official data Tuesday showed industrial output, retail sales and fixed investment grew at a much slower pace than expected in April. The figures were disappointing even though the low base of comparison from last year, when Shanghai was in lockdown, helped to boost the data.
A major worry was the jump in the unemployment rate for young people to a record high of 20.4%, a sign that the post-pandemic recovery isn’t strong enough to absorb the millions of new entrants to the labor market.
The data confirms signals from other recent indicators showing the recovery is waning. The property market remains weak despite early signs of a pickup in housing sales, inflation is close to zero and consumers are reluctant to borrow.
Economists say more policy action will be needed to keep the recovery going, although central bank steps alone won’t be enough to boost consumer and business confidence.
“Policy support is important, but the question is, which policy stimulus is most important,” Haibin Zhu, chief China economist at JPMorgan Chase & Co. said in an interview with Bloomberg TV. “Industry policy probably will play a more important role, then fiscal stimulus, particularly on the consumption stimulus.”
“Monetary policy can play a supplementary role, but honestly, a rate cut is not the most urgent response,” he said.
Chinese stocks closed 0.5% lower on Tuesday as Asian shares broadly gained. The onshore yuan weakened 0.17% to 6.964 per dollar as of 3:05 p.m. local time.
There were several warning signs in Tuesday’s data pointing to a faltering recovery. Property investment contracted 16.2% in April from a year earlier even though home sales grew, according to Bloomberg calculations based on official data. Construction of new homes continued to decline.
Output of key commodities used in construction, like aluminum and steel, fell in April from the previous month.
The People’s Bank of China hinted on Monday it will maintain a supportive policy, prompting some economists to predict it could take stronger action in coming months, including lowering the reserve requirement ratio or cutting interest rates. Tuesday’s data added to those calls.
“Consumption remained solid, yet the spike in youth unemployment to a record high raises questions about how sustainable that recovery can be,” said Michelle Lam, Greater China economist at Societe Generale SA. “Today’s data opens the door for further cuts in the reserve requirement rate and interest rates, possibly in June.”
The PBOC has refrained from aggressive rate cuts in recent years, preferring targeted stimulus measures instead. In a special section of its policy report on Monday, the PBOC said it has stuck to the so-called “attenuation principle” when making rate decisions, which means choosing a middle way, or relatively cautious approach toward rate decisions.
Zhang Yu, chief macro analyst at Huachuang Securities, said the PBOC’s report suggest chances for a rate cut are declining, but a reduction in the RRR is still possible in order to replenish liquidity.