China economic downturn may force COVID restrictions re-think

Dire Chinese industrial production numbers on Monday, although predicted, were much worse than expected year on year. The figures expected to be 0.4% and came in at -2.9% and retail sales were expected to be -6% and were nearly double that @ -11.1% ; which shows the impact of lockdowns.

The Chinese numbers raise fears of recession which is likely to affect world growth such is China’s influence. This is outweighing the effect of Russian commodity exports becoming more and more restricted as the Europeans tighten the sanction screws. However after the numbers, which may or may not be coincidental, the Chinese authorities announced a relaxation in Shanghai’s lockdown and rumours resurface that the Chinese central bank may be readying interest rate drops all of which enabled commodities to recover after an initial drop but they still look vulnerable to further falls.

In the data this week are unemployment in European states which are unlikely to be market moving but does add to the inflation and thereby rate story as wage inflation is driving a good proportion of inflation.

Retail sales are also due in the UK and USA and are being viewed as indications as to the state of the economy with the UK version likely to continue the poor state of the retail market especially the online version as the cost of living increases continues to restrain the consumer.

The US$ continues to bought on dips on interest rate differentials which in turn pressures commodity inflation in countries which don’t use or aren’t linked to the US$.

Date

Country

Figures

Expected

Previous

May 17

GBP

Unemployment rate

3.8%

3.8%

 

EUR

Unemployment change

2.6%

2.2%

 

USA

Retail Sales MoM

0.6%

0.5%

May 18

GBP

Inflation rate YoY

9.1%

7%

 

USA

Housing Starts

1.78m

1.793m

May 19

USA

Initial Jobless Claims

207K

203k

May 20

GBP

Retail Sales

-7.2%

0.9%

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