No recession in China

 In Articles

The Central Bank of America published the Beige Book last night. The report is drawn up by the twelve regional central banks and provides insight into developments in economic activity. 

Nearly all regions had seen signs of recovery in June compared to the previous period. However, the scale of economic activity is still significantly below pre-corona crisis levels. Positive developments were observed in consumer spending, employment, car sales, and DIY. On the other hand, both industrial production and demand for services remained low.

Cautious

The Fed is very cautious about the economic outlook as the recovery may be wiped out by the increase in corona infections. As a result, a number of states are forced to introduce additional restrictive measures to prevent the further spread of the virus. It is therefore not surprising that investors are reacting enthusiastically to positive test results of experimental corona vaccines.

The findings in the Beige Book are based on economic data up to 6 July this year. It is highly likely that the figures published yesterday on US industrial production in June were not fully incorporated into the Beige Book. Industrial activity increased monthly as a result of the easing of lockdown measures by as much as 5.4 percent, the strongest monthly increase in production since 1959.

Contraction but no recession

The easing of lockdown measures in China has been underway for some time. This morning, the Chinese government published the economic growth figures for the past quarter. GDP increased by 3.2 percent year-on-year. This is much better than the 2.6 percent economists had anticipated. On a quarterly basis, the Chinese economy grew by 11.5 percent. The impact of the corona measures on economic growth in the first half of the year is only 1.6 percent year-on-year. This means that formally speaking, there is no economic recession because there are no two consecutive quarters of contraction.  Chinese industrial production turned out stronger than expected in June. If economic growth continues, there will be a V-shaped recovery of the third-largest economy in the world.  Despite the good economic figures, the Chinese stock markets closed considerably in the minus. Investors may be anticipating less necessary stimulus measures by the authorities.

Recent Posts
Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Receive our FREE Strategy Reports 

Select from Alpha, Alternative and Opportunity; or get them all. 
GET STRATEGY REPORTS
close-link
%d bloggers like this: