Down she goes and where she stops nobody knows:
Labour Force came in weak at UE 3.7% and China is still stuffed. Credit Agricole:
July’s economic indicators surprised on the downside across the board. Retail sales,IP and FAI growth further weakened, while property sector contraction continued. Urban surveyed unemployment rate ticked up.
The PBoC has surprised with an earlier and larger than expected 15bpMLF rate cut. This sends a positive signal to the markets about Beijing’swillingness to act more swiftly, though the markets are still waiting for more concrete policy actions beyond the PBoC rate cuts. In particular, the key could be to stabilise the property sector and its related financial risks, which could still face some uncertainties in the near term.
We revise down our GDP growth forecast for 2023 to 5.1% from 5.4%previously, with the expectation of a shallower sequential growth recovery in H2 after the dip in Q2. We expect the 10Y CGB yield to edge lower to 2.5% at end 2023. While there could still be some near term upward pressures in USDCNY spot, we think the upside could be capped. We expect USDCNY to soften to 7.05 at end 2023.
I’m hearing more and about this Q4 China recovery unicorn. Good luck with it.
