Slow And Unsteady

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What’s going on?

Data out on Monday showed China’s economic growth slowed down last quarter, as the country gets a little too complacent after a fleet-footed start.

What does this mean?

China was the first major economy to bounce back after the pandemic broke out, and one of the few that actually managed to grow back in 2020. But the country hasn’t managed to keep the pace up for a couple reasons. For starters, retail sales grew at their slowest in over a year last month, after a fresh bout of lockdowns put a stop to shoppers’ spending. And for another, investments in property – an industry estimated to make up more than 20% of its whole economy – fell nearly 8% last quarter, probably because of the enduring effects of last year’s government crackdown. All told, China’s economy grew just 4% last quarter compared to the same time in 2020 – well below the 6.5% of the year before.

Why should I care?

The bigger picture: China’s shaking things up.

That kicked China’s central bank into action: it announced on Monday that it had cut the country’s interest rate for the first time in almost two years, slashing the cost of borrowing and encouraging shoppers to get out and spend. This, when most major economies are thinking about raising rates to keep inflation in check. But that’s the least of China’s problems right now: consumer prices in the country rose by a lower-than-expected 1.5% last month compared to the same time the year before – much less than America’s 7%.

Zooming out: Goldman’s got reservations.

China might be right to step in, especially since Goldman Sachs thinks Omicron – whose transmissibility arguably makes its spread more of a “when” than an “if” – could drag on the country’s economy even more. In fact, the investment bank cut its 2022 forecast for China’s growth from 4.8% to 4.3% last week.

Originally Posted on January 17, 2022 – Slow And Unsteady

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