China’s weak macro data shows that domestic demand and manufacturing activity in the country are shrinking because of the pandemic. However, the market is reacting more to the news on the anti-covid measures than to the macro statistics.
We want to warn you before you choose a broker here. Many beginning traders see the news as an opportunity to make a quick profit. But there are too many risks involved. During the news release many variables come into play, which cannot be considered or predicted.
China released a lot of macroeconomic data. Retail sales fell by 5.9% y/y (-0.5% in October, analysts expected -3.7%). Industrial production rose 2.2% (+5% early, consensus was +3.6%). The unemployment rate was 5.7% (previous reading was 5.5%, consensus 5.5%).
Retail sales are suffering because of the auto industry; government stimulus has not yet helped developers. The key component of retail sales is autos, where the decline was 4.2% y/y (the first y/y drop in six months). Auto production fell 9.9% y/y: many factories are currently experiencing production disruptions, and incentives to purchase electric vehicles are also expected to decline.
The real estate sector remains weak, with home sales down 31% y/y (-23% y/y in October) – no improvement so far after the sector support measures. Weakness in the sector also affected industrial production dynamics. Another factor affecting the industry was a decline in steel production amid falling domestic demand – output fell 6.5% to a low of 74.5 million tons this year.
Still under pressure from pandemic
Statistics indicate a decline in domestic demand and industrial activity. The dynamics of retail sales were the weakest since April, when there were massive lockdowns in major Chinese cities.
Economists note that the rise in COVID-19 infections in recent months may offset the loosening of individual restrictions and that the path to a full lifting of quarantines may be delayed. However, Chinese media report that authorities may shift their focus from disease control to economic growth in 2023.
Lifting lockdowns is more important than weak statistics
The consensus expects China’s epidemiological situation to begin to improve in the second to third quarters of 2023, and new lockdowns and restrictions cannot be ruled out until then.
The Chinese stock market tends to react to news of worsening/improving quarantines. Some easing of anti-coveting measures in the last month had a positive effect on the dynamics of shares of the Celestial Empire, while macroeconomic indicators do not yet point to an economic recovery.