Global markets will be on tenterhooks Monday awaiting the release of China’s third quarter gross domestic product (GDP) report, which is expected to show a continued deceleration in the world’s second largest economy.
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That would be the weakest pace of expansion since the first quarter of 2009, when it tumbled to 6.2 percent, but far from an alarming loss of momentum.
Crude oil prices started Friday on a high note, following a steady string of indications suggesting markets were still favoring the supply side because of weak economic growth.
The ANZ Banking Group has the lowest forecast, coming in at 6.4 percent. China has drawn five-year plans since 1953 to map strategies for overall economic and social development, setting growth targets and defining development policies. Many Western analysts, especially in financial institutions, treat China’s official GDP growth of around 7% as a political fabrication-and the IMF’s latest confirmation of its 6.8% estimate is unlikely to convince them. But the impact of a possible US rate hike is “complicated this time due to the presence of a factor, namely the slowdown in China, which has grown to be the world’s second-largest economy”, he said.
The German Chamber of Commerce said German companies accustomed to rapid growth of the Chinese economy need to adjust to the new normal. On the flip side, a few economists buck that view and believe consumption and service-sector growth are being underestimated by the government. According to analysis conducted by Gerard Burg, senior Asia economist at the NAB, the nation’s use of outdated accounting methodology could actually be grossly understating the size of the Chinese economy at present.
The Monetary Authority of Singapore said earlier Wednesday that it would target a slower appreciation of the Singapore dollar against a basket of currencies, in light of a softer outlook for the global economy. Projections widely anticipate slower growth in Q3.
The CICC expects the central bank to deliver another 25-basis point (bps) cut in interest rates and two cuts in bank reserve ratios totaling 100 bps by year-end.
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Any better than expected data such as 7% GDP would boost risk on sentiment in the market and commodities and currencies related to China might go for a rally. Eurostat, the statistical office of the European Union, reported an annual inflation rate for September at -0.1 percent, down from the 0.1 percent reported in August. Consumer inflation fell to 1.6 percent and the producer price index -which measures the cost of goods at the factory gate – dropped 5.9 percent, matching a six-year low in August.
