China Searches for Clearer Signs of Economic Momentum: Eco Week

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(Bloomberg) — China’s key economic data in the coming week is likely to show a pickup in growth after Beijing dropped its Covid Zero rules, though it’s not yet clear how solid or sustainable the recovery will be. 

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Official figures on Tuesday are expected to show gross domestic product grew 3.9% in the first quarter compared to a year prior, according to the median estimate in a Bloomberg survey of economists. While that would be an improvement on the 2.9% expansion recorded in the October to December, it’s still below the official target for full-year growth of around 5%. 

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March data is also expected to show increases in industrial output, investment and retail sales — though that’s partly due to the low base of comparison with March last year, when Shanghai, China’s largest city, was in lockdown. 

Early indicators, meanwhile, have been mixed: while credit and export growth beat expectations last month, weak inflation suggested demand remains subdued.

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Uncertainty over the strength of the data leaves open the debate of whether more stimulus is needed.

Chinaese officials have taken a pro-growth stance on the economy this year, though they’ve so far avoided aggressive easing measures such as cutting policy interest rates. Instead, the People’s Bank of China in March injected more cash into the financial system to encourage lending. Government bond sales have also been strong as infrastructure investment is ramped up through front-loaded fiscal support.

Speculation is brewing, though, over whether China would consider a rate cut or other measures, such as fiscal support. The central bank is expected to keep the rate on its one-year policy loans unchanged on Monday, but recent muted inflation figures suggest the PBOC will need to cut that rate in the second quarter by 10 basis points, David Qu of Bloomberg Economics wrote this week.

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What Bloomberg Economics Says:

“China’s first-quarter GDP will likely deliver clear evidence of recovery from the Covid-driven slump, powered by consumer spending and government stimulus.”

—For full analysis, click here

Elsewhere, European Central Bank President Christine Lagarde is set to speak and US data will show how much the Federal Reserve’s rapid tightening is weighing on housing. Meanwhile, South Korean export figures will provide a reading on global trade momentum.

Click here for what happened last week, and below is our wrap of what’s coming up in the global economy.

US Economy and Canada

After a week of price data that showed inflation is moderating yet still high, key reports in the US will be centered around housing. 

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On Tuesday, the government will issue figures on March housing starts and building permits. Existing-home sales follow on Thursday.

The Federal Reserve will also release its Beige Book that outlines recent economic conditions by region. John Williams, Raphael Bostic, Loretta Mester and Lisa Cook are among the Fed officials speaking in the coming week, prior to the central bank’s blackout period that precedes their May 2-3 policy meeting.

Further north, a fresh batch of inflation data on Tuesday will provide an early test of the Bank of Canada’s updated economic forecasts.

Asia

Japan hosts Group of Seven foreign ministers including US Secretary of State Antony Blinken through Tuesday, with officials expected to discuss economic coercion and other geopolitical issues. The group’s energy ministers meet  this weekend, with disputes raging about how fast to phase out gas and coal. 

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Minutes from Australia’s central bank, out Tuesday, will offer more clues to the thinking behind its recent rate pause. 

The Bank of Indonesia is expected to keep interest rates unchanged for a third-straight meeting later in the day, while New Zealand gives its latest quarterly price growth figures on Thursday. 

Singapore, Indonesia and Japan provide trade figures during the week, although South Korea’s preliminary numbers for April will offer the freshest pulse check. 

Japan’s inflation release on Friday is likely to show a further cooling of prices ahead of a Bank of Japan Governor Kazuo Ueda’s first meeting the following week.

Europe, Middle East, Africa

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Lagarde takes center stage, kicking off the week with an interview Sunday on CBS’s “Face the Nation” in the US — where she was attending spring meetings of the World Bank and International Monetary Fund — before appearing at the Council on Foreign Relations in New York on Monday.

At least nine other Governing Council members, including chief economist Philip Lane and Executive Board member Isabel Schnabel, are also scheduled to speak.

The ECB publishes the account of its March rate decision, when policymakers shrugged off banking turmoil and raised rates while holding off on committing to future steps.

Flash PMIs at the end of the week will show whether sentiment in Europe continued to improve early in the second quarter despite tumult in the banking sector. 

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In the UK, inflation will probably tumble out of double digits for the first time in seven months when figures for March are posted on Wednesday. Wage data may show the pace of increases slowed in the latest three-month period. 

Together, economists expect those two reports to build the case for the Bank of England to bring to an end its quickest series of interest rate increases in three decades. Remarks by rate setters Jon Cunliffe, Catherine Mann and Silvana Tenreyro will be watched for potential clues. 

Data on Wednesday will likely show inflation in South Africa exceeded the 6% ceiling of the central bank’s target range for an 11th month. Forward-rate agreements for the next meeting on May 25 — used to speculate on South African borrowing costs — show expectations for a 25-basis-point increase in the repo rate to 8%. 

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On the same day, Namibian policymakers are forecast to increase borrowing costs by 50 basis points to rein in high inflation and safeguard the nation’s currency peg with neighboring South Africa’s rand.

Latin America

Weak manufacturing has weighed on Brazil’s industrial production, still below pre-pandemic levels, so look for the February print to present more downbeat data. Brazil since 2014 has averaged negative industrial output results, the worst performance among the region’s five big economies.

Banco Central do Brasil’s January GDP-proxy reading for Latin America’s biggest economy will likely show a slight expansion. Looking ahead, it may not get much better: local economists see growth of just 0.9% in 2023 and sub-par performance at least through 2026.

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In Colombia, February economic activity data reported on Tuesday will likely reflect some of the slowing that has analysts marking down their 2023 forecasts.

The minutes of Banco Central de Chile’s April 4 meeting will likely find policymakers recommitting to a higher-for-longer mode with the key rate now at 11.25%. Inflation peaked at 14.1% in August but has slowed just 300 basis points since, prompting the bank to push back against speculation that monetary easing might begin any time soon.

The central banks of Uruguay and Paraguay each hold interest rate meetings in the coming week. Both banks have hit their terminal rates and inflation is slowing, while remaining above each nation’s respective targets.

—With assistance from Vince Golle, Paul Jackson, Robert Jameson, Sylvia Westall, Stephen Wicary, Nasreen Seria and Reed Landberg.