|

China: Growth recovery extended but demand side still lagged – BBVA

On Friday, key economic data was released in China. Economic activity indicators of July including industrial production, fixed asset investment and retail sales all pointed that growth recovery extended in the second half of the year, noted analysts at BBVA. However, they warn the demand side still lagged behind the supply side.

Key Quotes: 

“Economic activity indicators of July maintained recovery momentum, indicating the post-COVID recovery extended in 2H.”

“The unbalanced recovery, that demand side lagged behind the supply side also exists in July, but it improves from the 1H. The better-than-expected recovery makes the PBoC plan to gradually normalize monetary policy in 2H, however, the monetary policy normalization does not necessarily mean the tightening cycle starts.”

“We expect an unbalanced recovery to continue in the following months and the economy still needs time to go back to the prior-COVID level. The sustainable recovery of Chinese economy in 2H depends on to what extend the authorities' monetary and fiscal easing measures could stimulate the domestic demand.”

“We maintain our prediction that the GDP growth rate will steadily climb up to 5% y/y in Q3 and 6% y/y in Q4, concluding 2020 with a full-year growth outturn of 2.2% (higher than the IMF's 1% forecast while generally in line with the market consensus), making China be one the few countries or regions in the world achieving positive growth in 2020.”

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

More from Matías Salord
Share:

Editor's Picks

AUD/USD drops to two-week low, further below 0.7000 after RBA's less hawkish rate hike

AUD/USD drifts lower for the second straight day on Tuesday, hitting a fresh two-week low during the Asian session after the Reserve Bank of Australia's (RBA) widely expected 25 bps rate hike. The decision was far from unanimous, with three members preferring to hold rates at 4.60%. This tempers expectations of further tightening, which, along with modest US Dollar strength, weighs on the currency pair.





USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.


Gold struggles near $3,900 as traders assess Middle East developments,US election risks

Gold (XAU/USD) loses momentum on Tuesday as Oil prices rebound after the Wall Street Journal (WSJ) reported a US strike on Iran’s Qeshm Island. At the time of writing, XAU/USD trades around $3,909, down 0.93% on the day.

Crypto Today: Bitcoin, Ethereum, XRP under pressure as investors pull capital

Bitcoin trades downward at $76,566 on Tuesday, testing six-week lows. Ethereum, like Bitcoin, trades under pressure as it consolidates within a narrow support range. Meanwhile, Ripple hovers marginally above $1.25.

BoE is set to hike rates this week: Warns against 'unwarranted' aggressive tightening
We see a hike as a done deal this week and another, while not yet our baseline scenario, is possible in February should inflation stay above 4%, commodity prices remain high and activity remain resilient. We remain of the view, however, that aggressive tightening is unwarranted, for four main reasons: There are no clear signs of second-round inflation effects, nor do we think that there will be.
The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.