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Good morning and welcome to our continued coverage of the world economy, the financial markets, eurozone and companies.
China has become the first major economy to recover from the Covid-19 pandemic. It grew 4.9% between July and September compared to the previous year, compared to an annual rate of 3.2% in the previous quarter, according to government data.
The growth rate was slightly lower than the 5% or more forecast by analysts, but represents a major change from the first quarter of this year, when the economy contracted 6.8%, China’s first contraction since 1992, when officials began keeping quarterly GDP data.
China’s central bank governor Yi Gang said on Sunday that officials forecast growth of around 2% by 2020. China is expected to be the only G20 economy to grow this year. The world economy as a whole is expected to contract by 4.4%, according to the predictions of the International Monetary Fund, which would be the steepest recession since the Great Depression.
The Chinese economy remains resilient with great potential. A continued recovery is anticipated, which will benefit the global recovery.
Here is our full story.
While the growth rate disappointed the market, “it was actually pretty good,” says Iris Pang, chief economist for Greater China at ING. The most encouraging factor is consumption, he says.
Retail sales increased to 3.3% yoy in September from 0.5% yoy in August. This big jump shows that consumption has stabilized even more, and there was also evidence of higher spending by businesses.
Interprovincial travel has helped the economy a lot, as mainland Chinese “spenders” have stayed home to spend on tourist services and luxury goods at duty-free shops. These activities have created jobs for low-skilled labor market participants and contributed to further stabilizing consumption.
Chinese equity markets initially rose, but then fell back. The CSI 300 Index fell 0.87%. However, other Asian equity markets were up: Hong Kong’s Hang Seng gained 0.5% and Japan’s Nikkei 1.1%. Confidence was boosted by hopes for a US fiscal package and expectations for a coronavirus vaccine by the end of the year.
It’s a great day for central bank speeches, and US Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde, and Bank of England Deputy Governor Jon Cunliffe are going to speak this afternoon. Markets will be looking for more clues as to the biases of UK central banks when it comes to negative rates.
The pound remains above a 10-day low as Brexit negotiations enter a crisis week. Boris Johnson said on Friday it was time to prepare for a no-deal outcome when the transition phase ends on December 31, which alarms markets. The EU’s chief negotiator, Michel Barnier, had planned to travel to London to speak with his British counterpart David Frost, but will now speak by phone.
The agenda
- 1pm BST: Speech by Fed Chairman Jerome Powell
- 1:45 pm BST: speech by ECB President Christine Lagarde
- 3:05 pm BST: Speech by Bank of England Deputy Governor Jon Cunliffe
