Goldman wakes in fright. Given the enormous pile of inventories in DMs now, I do wonder if the trade shock will not be sharper than these other recessions.
China’s May activity data showed clear improvements from the April trough and surprised market expectations to the upside. Auto sales, online goods sales, property sales and housing starts registered the biggest sequential gains, benefiting from easing Covid restrictions and increasing policy support. That said, the level of output is still low, especially in consumer and services sectors, and our current Q2 GDP forecast assumes accelerated recovery momentum in June.
Domestic growth uncertainties including Covid, housing and policy linger, and the recent Covid cluster in Beijing is a case in point. Even with frequent mass testing, local outbreaks and district-level restrictions may still take place from time to time. But the associated economic damage is likely to be much smaller than the Shanghai lockdown given the much faster responses to Covid cases. Overall, the latest batch of data and news suggest domestic risks have not increased.
