(Bloomberg) — China’s economy is leaning on industrial production to keep growing this year, and next week’s data will provide clues as to how strong that support remains.
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Export figures due on Wednesday could show some improvement in July, underscoring that trade has been a rare bright spot.
Ship volumes from Chinese ports were 8.5% higher in the first half than in 2023, with container freight rates rising by a factor of four, according to NCFI. Exports – from cars to steel and consumer goods – soared.
The picture will look less clear in the future. Manufacturing survey data is shaky, with overall factory activity down. Most worrying was one measure – the Caixin index, with a relatively higher weighting of private companies and exporters – which unexpectedly contracted for the first time in nine months.
This is a worrying sign, especially after Chinese officials made clear in July that there would be limited aid to boost domestic consumption, a component that has been noticeably missing from the economic growth pie since the housing bubble burst.
Exporters may also see diminishing returns. While trading volumes are rising, Chinese companies are not necessarily benefiting as they are also cutting prices. As a result, the total value of goods exports has barely increased this year, only by about 0.4%.
Later this week, inflation figures are expected to remain soft, with producer prices set to fall for the 22nd month in a row.
Analysts are taking note. Economists at Citi have cut their forecast for this year’s Chinese growth to 4.8% from 5%, while UBS economist Wang Tao now sees some downside risk to a 4.9% growth forecast.
What Bloomberg Economics says:
“Chinese exports likely grew faster in July, helped by a favorable comparison with soft figures from a year earlier. It won’t be enough to achieve faster GDP growth. So far, it looks like the third quarter will repeat the pattern of the previous quarter, when weak domestic spending outweighed export gains. For overall growth to meet the official 5% target by 2024, more stimulus measures are needed to boost domestic demand.”
—Click here for a full analysis
Elsewhere, US services activity likely grew only slightly in July; German data could reveal whether the country’s industrial slump continues and central banks from Australia to India and Mexico will set interest rates.
Click here for what happened last week, and below is our summary of what’s going to happen in the global economy.
USA and Canada
After Friday’s monthly jobs report, which showed a marked slowdown in wage growth and fueled recession concerns, the US economic calendar is lightening considerably.
The Institute for Supply Management will release its services index on Monday, and economists predict modest growth in July.
Investors will focus on weekly unemployment benefits data on Thursday. Jobless claims are expected to decline only slightly in the week ending August 3 from their highest point in nearly a year. The figures will provide clues as to whether the labor market is at greater risk of a downturn.
The number of Federal Reserve officials showing up is also sparse after the central bank left interest rates unchanged on Wednesday. But investors will hear from a few, including regional Fed bank presidents Mary Daly of San Francisco and Thomas Barkin of Richmond, both FOMC electors in 2024, and Austan Goolsbee of Chicago.
Meanwhile, a strike that would close six of the 10 busiest ports in the US just weeks before the presidential election appears increasingly likely.
Further north, the Bank of Canada will publish a summary of the deliberations that led to the July 24 cut in the policy rate to 4.5%, and its signal of further easing. The document could provide insight into the likelihood of a third consecutive cut in September. Statistics Canada will also release its labor force survey for July, which will likely show job growth lagging behind explosive population growth.
Asia
In Asia, we see two major central banks tapping into policy, with attention focused on whether they are softening their rhetoric.
The Reserve Bank of Australia is expected to keep its cash interest rate target at 4.35% on Tuesday after core inflation unexpectedly cooled in the second quarter and economic growth slowed more than expected in the first three months of 2024.
Two days later, the Reserve Bank of India appears to be keeping its benchmark interest rate at 6.5%, while adjusting its language to convey a neutral pause rather than an aggressive stance, as more and more officials worry about growth prospects .
Elsewhere, Japanese income figures for June could show the fastest pace of increase in a year as the fastest wage increases in more than three decades begin to take hold.
Trade figures are also expected in the Philippines and Taiwan.
Second-quarter economic growth in the Philippines is expected to accelerate year on year but slow to 1% from the previous period, while the country’s price increases could pick up in July after typhoons pushed up food prices.
Europe, Middle East, Africa
Germany will release key production-related data for three days in a row, starting on Tuesday with factory orders and then followed by exports and finally industrial production for June.
Economists predict the latter measure rose 1% this month, partly reflecting a much larger decline in May, when output levels reached their lowest level since the first year of the pandemic.
In Great Britain, where the Bank of England implemented a short interest rate cut on Thursday, the calendar will be considerably quieter. The central bank will publish a quarterly report on its quantitative easing program on Tuesday.
As for Russia, Friday’s data is likely to show that growth in the second quarter slowed from the previous three months. However, the economy remains overheated as rising inflation forces the central bank to raise interest rates sharply for the first time this year.
A number of consumer price releases are planned:
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Turkish inflation may have fallen to 62% on Monday, compared to 72% a month earlier. That would be another signal that the central bank has gained control over prices and that Turkey is past the worst of its cost of living crisis.
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Egyptian authorities hope on Thursday that inflation will slow for the fifth month in a row. The indicator fell to 27.5% in June, just before the country received a massive bailout led by the UAE and the IMF, which appeared to have ended the currency crisis.
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And on Friday, both headline inflation and underlying measures of inflation are expected to rise slightly in Norway. The central bank has said it expects to keep its key interest rate at the highest level since 2008 until sometime in 2025.
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The final German and Italian inflation data for July will be published the same day.
Three major interest rate decisions are planned in the wider region this week:
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On Tuesday, Kenya’s central bank could keep borrowing costs at 13% amid ongoing anti-government demonstrations that have shuttered businesses and led to renewed currency pressures after the government scrapped a plan to borrow as much as 346 billion shillings ($2.7 billion). ) to raise taxes. .
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The next day, Romania’s central bank could consider a further rate cut, and officials will also debate and approve a quarterly inflation report likely to be presented by Governor Mugur Isarescu on Friday.
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Serbia’s central bank’s decision on Thursday could lead to more easing after two consecutive interest rate cuts, or else a pause to assess remaining price pressures.
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For more information, read Bloomberg Economics’ full Week Ahead for EMEA
Latin America
Disinflation has stalled in much of Latin America, with the exception of Colombia, sidelining or at least slowing central bank easing cycles.
Banco de Mexico and Banco Central de Reserva del Perú will hold their August rate meetings on Thursday, and the consensus among analysts is that Banxico will cut borrowing costs by a quarter point to 10.75%, while BCRP will remain at 5.75%.
Banco Central do Brasil will publish on Tuesday the minutes of its decision of July 31 to keep the policy rate at 10.5% for a second meeting. Analysts are slowly coming to the conclusion of traders that a rate hike could be planned this year, although the statement after the decision did not provide strong indications of this.
Colombia’s central bank also releases the minutes of its July 31 meeting, where policymakers looked past accumulating upside risks to inflation and made a fourth consecutive half-point cut to 10.75%.
Consumer price data from four of Latin America’s larger economies are likely to show further increases above the 3% targets in Brazil, Mexico and Chile over the past month, while falling just below 7% in Colombia, compared by 7.18% in June.
Mexican inflation figures for July are released hours before Banxico ends its rate meeting, and some analysts see an annual increase of 5.5% or higher, compared to 4.98% in June.
–With help from Brian Fowler, Robert Jameson, Laura Dhillon Kane, Piotr Skolimowski, Paul Wallace and Kira Zavyalova.
(Updates with US dockworkers in US section, Canada section, Germany section in EMEA section)
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