Delta intensifies China’s growth slump

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As usual, Goldman is taking the bullish view:

The ongoing Covid outbreak in China, though still small in absolute terms with only a few hundred officially confirmed cases, has spread across many provinces and raised concerns among investors over its impact on economic activity.

We use the previous outbreak in Guangdong province in May-June, also triggered by the highly contagious Delta variant, as a benchmark. At its current geographic scope, and if restrictions stayed in place one month, we estimate the potential impact on China’s Q3 growth would be around 0.7pp (annualized), mainly on weaker service-sector activity. Of course, the actual impact could be smaller or potentially much larger, depending upon the ultimate length and breadth of the outbreak and the severity of the restrictions needed to control it.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.