Chinese economy stabilizes with uncertain growth outlook

(Bloomberg) – China’s economy continued to stabilize at subdued levels in February, weighed down by a slump in the housing market, weaker global demand and disruptions to business activity over the Lunar New Year holiday.

This is the outlook for Bloomberg’s aggregate index of the top eight indicators for this month. While the overall gauge remained unchanged, several underlying measures deteriorated, suggesting an uncertain growth outlook that may require more fiscal and central bank support in the months ahead.

Manufacturers usually close for the week-long Lunar New Year holiday, which ended on Feb. 6 this year, which has dampened production. This was reflected in Standard Chartered Plc’s survey of more than 500 small businesses, with sub-indices tracking production and sales slumping further from January levels.

Even so, the business climate among small businesses has improved this month, largely due to a spike in the “expectations” sub-index, a sign of greater “normalization” in their outlook, wrote Standard Chartered economists Hunter Chan and Ding Shuang in a report. . It was also likely bolstered by recently announced measures to promote domestic demand and reduce the corporate tax burden, particularly targeting small businesses, they said.

Global demand is also stabilizing, which could be a sign that China’s record export growth may start to slow in the coming months. South Korean exports, an indicator of global trade, grew at the slowest pace since last March. The trend is also confirmed by the Standard Chartered survey, with the export-oriented companies sub-index dropping significantly into contractionary territory.

Real estate sales continued to slump in February, although the holiday season is usually a good month for purchases as people return to their hometowns and buy real estate. Authorities have recently started easing restrictions to revive the industry, which may provide some support in the future.

The Shanghai branch of China’s central bank urged commercial banks to speed up home loans, and banks in Guangzhou cut mortgage rates. Mortgage down payments for some homebuyers were cut last week in several cities, including Chongqing.

However, steel rebar inventories jumped, indicating that construction activity has remained weak at present, in part due to holidays and virus outbreaks.

The stock market continued to tumble in February, with the benchmark extending its losses from January amid heightened geopolitical tensions linked to the Russian military attack on Ukraine. The index is down more than 7% this year.

Early indicators

Bloomberg Economics generates the overall reading of activity by aggregating a three-month weighted average of monthly changes in eight indicators, which are based on company surveys or market prices.

  • Top Onshore Stocks – CSI 300 Index of A-shares listed in Shanghai or Shenzhen (as of market close on the 25th of the month).
  • Total area of ​​home sales in China’s four Tier 1 cities (Beijing, Shanghai, Guangzhou, and Shenzhen).
  • Inventory of steel reinforcing bars, used for reinforcement in construction (in 10,000 metric tons). Falling inventory is a sign of growing demand.
  • Copper price – Spot price of refined copper in the Shanghai market (yuan/metric ton).
  • South Korean Exports – South Korean exports in the first 20 days of each month (year-on-year variation).
  • Factory Inflation Tracker – Bloomberg Economics has created a Chinese producer price tracker (year-over-year change).
  • Small and Medium Business Trust – Business Survey conducted by Standard Chartered.
  • Passenger car sales – Monthly result calculated from average weekly sales data released by China Passenger Car Association.

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