Jumped The Gun

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What’s going on?

Fresh data out on Tuesday showed that Chinese retail sales grew by more than expected at the start of the year, but the country might be headed straight back to its starting point.

What does this mean?

The Chinese economy was off to a flying start at the beginning of the year, as folk in the country splashed out to celebrate Lunar New Year and Beijing’s Winter Olympics. And they weren’t fussy about what they bought: spending was up in all but one of the retail categories from the same time last year. The biggest rises were in fuel and jewelry, but car sales – which actually fell during a lot of last year – chipped in too. Overall, retail sales in January and February – combined to even out the Lunar New Year’s impact since it can fall in either month – grew by 6.7% from the same time last year, much higher than the 3% analysts expected.

Why should I care?

Zooming in: Not too fast…

China’s strong start mightn’t last long: the country’s now battling its biggest surge in Covid cases since the start of the pandemic, with over 45 million people back in lockdowns as a result (tweet this). Add in that Goldman Sachs predicted last week that rising oil prices could cut China’s economic growth by 0.5%, and plenty of economists now doubt the country’s economy will hit its goal of growing 5.5% this year. And that – along with fears of new sanctions over its ties to Russia – might be why an index tracking some of China’s biggest companies fell 5% on Tuesday.

The bigger picture: Apple’s feeling it.

Lockdowns in China – the world’s biggest manufacturing hub – have been shutting down production plants around the country, and that’ll have a major impact on global supply chains. Foxconn, for one, just closed its Chinese production sites that were busy whipping up the latest iPhone 13. That could really hurt Apple’s sales, and investors know it: they sent Apple’s shares down to their lowest since November this week.

Originally Posted March 15, 2022 – Jumped The Gun

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