China's GDP growth came out below market expectations! Looking at expectations from the Bloomberg survey, only one economist expected that the country's growth could be at such a “low level”. Of course, looking at the dynamics, growth of 6.3% y/y does not seem weak, although more was expected (growth of 7.1% y/y). In the first quarter, growth was 4.5% y/y. It's worth remembering that in the second quarter of last year, China introduced very restrictive covid measures, including in the Shanghai region, which then severely limited economic growth. That is why the market expected that economy would grow much stronger.
In quarterly terms, growth came out at 0.8% q/q, in line with market expectations and the growth in the previous quarter was 2.2% q/q. Industrial production for June grew stronger than expected at 4.4% y/y and retail sales were slightly below expectations at 3.1% y/y. So where is the problem with the Chinese economy? In the real estate market and in the "strong" yuan. The yuan is not weak enough to boost subdued exports. On top of that, real estate market sentiment remains very weak. At the same time, it seems that GDP data is not weak enough to lead to a further cut in interest rates. PBOC will decide on interest rates on July 20 and despite weak data, there is no expectation that the bank will cut rates once again. Recently, the PBOC surprised negatively by cutting rates less than expected.
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Open account Try demo Download mobile app Download mobile appOil is losing nearly 1.5% today, mainly due to data from China, as the country is responsible for a very large share of expected demand growth this year. At the beginning of the year, imports were disappointing due to high inventories. Now that inventories are running out and China should import more oil. However, without a stronger stimulation of the economy, China's demand growth may fall short of expectations. At the same time, looking from the side of oil itself - a very cheap dollar may support the continuation of the rebound, although a "tactical correction" cannot be ruled out.
Brent oil is testing the area of $78.5 per barrel. If this level is broken, a test of the area around $77 per barrel cannot be ruled out. The size of the range of the previous downward wave also falls slightly lower. Seasonality indicates that further decline may be seen until the end of July. Nevertheless, for the moment, the uptrend remains unbroken. Source: xStation5
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