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Economic growth will continue to be led by investment in view of the expected stabilisation in consumption spending. We estimate GDP growth in 2019 and 2020 will be at 3.0% each year and inflation at 3.3% and 3.2%, respectively. The Central Bank will keep its interest rates stable for a long time.
The Q2 GDP growth came at 6.2% y/y (versus 6.4% y/y in Q1), in line with market consensus. Growth slowdown in Q2 is widely expected amid the unsettled trade war with the US and the domestic structural obstacles such as debt overhang and financial risks.
Recently, the surplus of the current account also narrowed significantly. Looking ahead, a combination of “current account deficit” and “capital account two-way fluctuation” could become a “new normal” for China’s Balance of Payments (BoP).
A batch of April economic indicators are announced today, together with previously released trade and credit data, suggesting that the risk of growth deceleration looms large even before the escalation of US-China trade war in early May.
Risk-off mood resurfaced in financial markets, boosting VIX volatility and safe haven demand, although underlying hopes of an eventual trade resolution contained market losses.
Financial markets rattled for the third straight day as US-China trade tensions festered ahead of crucial negotiations between high-level officials in Washington, starting today. Trump’s rebuke that ‘China broke the deal’, accelerated the sell-off in equities.
The 'risk-off' mood persisted across markets today as global growth concerns mounted in the wake of escalating US-China trade conflict, downbeat China exports data, and a flair-up in geopolitical tensions in the Middle East with Iran poised to breach parts of the nuclear deal.
Caution prevailed across financial markets, as US-China trade tensions ratcheted up further today. The slight downward revision in Eurozone growth forecast by European commission did not help either. Safe-haven bonds continued to attract fresh demand, while equity markets declined.