China

China’s economy shrinks significantly in the first quarter

As a result of the corona lockdown in February, China has lost about one-tenth of its economic output in the first quarter of this year, representing a 6.8 percent drop in GDP compared to the first quarter of 2019, by far the lowest figure for Chinese economic growth since the country began publishing quarterly growth rates in 1992 and probably the sharpest drop in growth since the turmoil of the Cultural Revolution in the late 1960s. However, the economic data released today also show how China’s economy has progressed since the cautious easing of rigid restrictions in March. According to official data, industry increased production in March by almost a third compared with the previous month, and the year-on-year gap narrowed from over 13 to just over one percent. By contrast, consumption is recovering only very tentatively. Retail sales in March remained deep in the red compared to the previous…

China: Growth forecast 2020 reduced to zero

As the country of origin of the pandemic, China was the first economy to fall into the Corona crisis. The Chinese economy experienced an unprecedented slump, as shown by the February figures from industry and retail, which were in double digits of minus. Since the beginning of March, the Chinese authorities have been relaxing the strict restrictions on public life and the economy is slowly beginning to recover. However, daily data on economic activity show that the road back to normality is very bumpy and will probably take a long time. The stumbling blocks are not only the high security requirements to prevent a new wave of infection. The lockdown, which lasted for weeks, has deeply unsettled consumers. Shops and restaurants are still being avoided. In addition, the global economy is facing an ever deeper recession. Large parts of the Chinese export economy are facing a dramatic drop in demand….

Oil: Supply side is on the move and China is going bargain hunting!

The epic drop in oil prices is causing the three biggest oil producers Saudi Arabia, Russia and the USA to talk to each other again. Meanwhile, the US president is tweeting and announcing an imminent cut in Opec+ production of 10 million barrels per day. The oil price has risen sharply as a result. Since Wednesday the Brent crude oil price has risen by over 25 percent. However, neither Russia nor Saudi Arabia has confirmed any agreement. Only a virtual special meeting has been arranged for Monday – but nothing more so far. It will not be easy, however, and the US oil industry will have to play its part. If there is no signal here, the remaining OPEC+ countries will also hold back. The increase in American oil reserves could at least be a signal of this kind. However, it would be better if the US frackers could agree…

Deep red economic figures from China

It was more than foreseeable that the corona shutdown in China would result in massive economic losses. However, it was difficult to estimate how large the losses would be and even more difficult to predict whether the Chinese leadership would even reveal the full extent of the collapse. Even the announcement of the record-low purchasing managers‘ indices two weeks ago came as a certain surprise. The now published growth figures from industry, retail trade and construction reflect the devastating mood polls of February: economic activity has collapsed in the double-digit percentage range. Industrial production contracted by a quarter in February compared to the already weak previous month. Output in January and February combined was more than 13 percent below the level of the same period in 2019, while retail sales fell by more than 20 percent year-on-year. Taking into account the currently high inflation, they are likely to have collapsed…

China: Mood in the cellar

Due to the corona eruption, the Chinese economy is currently experiencing the worst slump in growth since the financial crisis of 2008/09, and the results of the recently published purchasing manager survey give a first impression of how dramatic the losses are. These are the first comprehensive economic indicators for the month of February and they paint a devastating picture. The survey results from the industrial sector have each fallen by more than ten index points compared with the previous month. There has not been such a slump within one month since the survey of the indices. By way of comparison, in autumn 2008 the two indicators each lost around twelve points within two and three months respectively. Moreover, both indices have currently reached new all-time lows of 40.3 points (survey by IHS Markit) and 35.7 points (survey by the Chinese statistical office). The survey in the service sector has…

Corona – from epidemic to pandemic

The corona virus and its recent rapid spread across the globe bring much suffering to the people affected. According to current knowledge, about 20% of those affected can expect a severe course of the disease, 5% die on average. The financial markets reacted in their own way. The stock markets fell sharply in the course of the week. Investors‘ economic and profit expectations are coming under increasing pressure due to the rapid spread of the disease. If the disease spreads to become a serious pandemic, with heavy strain on supply chains, global growth is likely to come close to stagnation. Export-oriented countries would be hit harder than domestically oriented economic models. We are not there yet, but the world has come a few steps closer to this scenario in the course of this week. Already now, the real economic data is likely to have a significant negative impact. At best,…

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