Tag: from fiscal year
May 16, 2022: China's economic activity cooled sharply in April as widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment, adding to fears the economy could shrink in the second quarter.
Full or partial lockdowns were imposed in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai, keeping workers and shoppers confined to their homes and severely disrupting supply chains.
Retail sales in April shrank 11.1% from a year earlier, the biggest contraction since March 2020, data from the National Bureau of Statistics (NBS) showed on Monday, and worse than forecast.
Dining-out services were suspended in some provinces, which led to a 22.7% drop in catering revenue in April. China's auto sales plunged 47.6% from a year earlier as carmakers slashed production amid empty showrooms and parts shortages.
As the anti-virus measures snarled supply chains and paralysed distribution, industrial production fell 2.9% from a year earlier, below expectations for 0.4% growth. The reading was the largest decline since February 2020.
In line with the decline in industrial output, China processed 11% less crude oil in April than a year earlier, with daily throughput falling to the lowest since March. The country's April power generation also fell 4.3% from the previous year, the lowest since May 2020.
The shock also weighed on the job market, which Chinese leaders have prioritized for economic and social stability. The nationwide survey-based jobless rate rose to 6.1% in April from 5.8%, the highest since February 2020 when it stood at 6.2%.
The 6.7% jobless rate in 31 major cities in April is the highest since records started in 2018.
The government aims to keep the jobless rate below 5.5% in 2022.
China wants to create more than 11 million jobs, and preferably 13 million urban jobs this year, Premier Li Keqiang said in March, but he recently called the country's employment situation "complicated and grim" following the worst COVID-19 outbreaks since 2020.
Fixed asset investment, the main driver that Beijing is counting on to prop up the economy as exports lost momentum, increased 6.8% year-on-year in the first four months, compared with an expected 7.0% rise.
The extended lockdown in Shanghai and prolonged testing in Beijing are adding to the concerns about economic growth over the rest of the year, said Nie Wen, Shanghai-based economist at Hwabao Trust.
"It's still possible to achieve a GDP growth of around 5% this year if COVID curbs are only going to affect the economy in April and May. But the virus is so infectious, and I remain concerned about growth going forward."
Analysts say Beijing's official 2022 growth target of around 5.5% is looking harder and harder to achieve as officials maintain draconian zero-COVID policies. Moreover, the key property market is in a protracted slump and export growth has slowed to a two-year low.
The economy grew 4.8% in the first quarter.
China's financial authorities said on Sunday they will let banks cut the lower limit of interest rates on home loans based on the corresponding tenor of the Loan Prime Rate for first home purchases, a move to support housing demand and promote healthy development of the country's property market.
ING analysts are looking for a 1% contraction in economic growth in the second quarter from a year earlier, while Nomura said the Chinese economy has been facing a rising risk of recession since mid-March.
Capital Economics is now forecasting full-year Chinese growth of just 2%, and says if COVID cannot be controlled even that is not guaranteed.
"Even once the current virus wave is quashed, COVID controls will continue to hold back activity to some degree over the coming quarters," it said in a note on Friday.
While policymakers have repeatedly pledged more support for the slowing economy, stimulus so far has been "underwhelming", with only small policy rate cuts, it added.
China's central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a fourth straight month on Monday.
Nie said authorities would be cautious in rolling out quantitative measures like large-scale cuts to interest rates or banks' reserve requirement ratios to spur the economy, given concerns about U.S. interest rate hikes and a depreciating Chinese currency, but structural and targeted measures, such as in the property sector, would be preferred.
May 16, 2022: Oil prices slipped on Monday, giving up earlier gains as investors took profits after a surge in the previous session, but global supply fears loomed with the European Union preparing to phase in a ban on imports from Russia.
Brent crude futures were down 64 cents, or 0.6%, at $110.91 a barrel at 0137 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 60 cents, or 0.5%, to $109.89 a barrel.
Both benchmarks, which jumped about 4% last Friday, earlier increased by more than $1 a barrel, with WTI reaching its highest since March 28 of $111.71.
"Oil markets are expected to gain this week as a pending ban by the European Union on Russian oil will further tighten global supplies of crude and fuels," said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
The EU still aims to agree on a phased embargo on Russian oil this month despite concerns about supply in eastern Europe, four diplomats and officials said on Friday, rejecting suggestions of a delay or watering down proposals.
Last week, Moscow - which calls its actions in Ukraine "a special military operation" - slapped sanctions on several European energy companies, causing worries about supplies.
Meanwhile, U.S. gasoline futures set a fresh all-time high again on Monday as falling stockpiles fuelled supply concerns.
"Oil prices remained bullish, especially WTI's near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe," Fujitomi Securities' Saito said.
On the supply side, U.S. energy firms in the week to May 13 added oil and natural gas rigs for an eighth week in a row as high prices and prodding by the federal government prompted drillers to return to the wellpad.
Elsewhere OPEC+ - the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia - has been undershooting previously agreed plans for output increases due to under-investment in oilfields in some OPEC members and, more recently, losses in Russian output.
The latest monthly report from OPEC showed its output in April rose by 153,000 barrels per day (bpd) to 28.65 million bpd, lagging the 254,000 bpd rise that OPEC is allowed under the OPEC+ deal.
May 16, 2022: Asian share markets were struggling to sustain even a minor rally on Monday after shockingly weak data from China underlined the deep damage lockdowns were doing to the world's second-largest economy.
China's April retail sales plunged 11.1% on the year, almost twice the drop forecast, while industrial output dropped 2.9% when analysts had looked for a slight increase.
The risks had been to the downside given new bank lending in China hit the lowest in nearly four and half years in April.
China's central bank also disappointed those hoping for a rate easing, though Beijing on Sunday did allow a further cut in mortgage loan interest rates for some home buyers.
News that Shanghai was relaxing some of its lockdown restrictions offered only cold comfort to investors.
Chinese blue chips shed 0.4% in reaction, while commodity currencies took a knock led by the Australian dollar which is often used as a liquid proxy for the yuan.
MSCI's broadest index of Asia-Pacific shares outside Japan were still up 0.2%, though that followed a 2.7% slide last week when it hit a two-year low.
Japan's Nikkei clung to gains of 0.6%, having lost 2.1% last week even as a weak yen offered some support to exporters.
EUROSTOXX 50 futures and FTSE futures went flat. S&P 500 stock futures lost early gains to ease 0.4%, while Nasdaq futures fell 0.3%.
Both are far from last year's highs, with the S&P having fallen for six straight weeks.
Sky-high inflation and rising interest rates saw U.S. consumer confidence sink to an 11-year low in early May and raised the stakes for April retail sales due on Tuesday.
A hyper-hawkish Federal Reserve has driven a sharp tightening in financial conditions, which led Goldman Sachs to cut its 2022 GDP growth forecast to 2.4%, from 2.6%. Growth in 2023 is now seen at 1.6% on an annual basis down from 2.2%.
"Our financial conditions index has tightened by over 100 basis points, which should create a drag on GDP growth of about 1pp," said Goldman Sachs economist Jan Hatzius.
"We expect that the recent tightening in financial conditions will persist, in part because we think the Fed will deliver on what is priced."
Futures imply 50 basis-point hikes in both June and July and rates between 2.5-3.0% by year-end, from the current 0.75-1.0%.
Fears that all this tightening will lead to recession spurred a rally in bonds last week, which saw 10-year yields drop 21 basis points from peaks of 3.20%. Early Monday, yields were easing again to reach 2.91%.
The pullback saw the dollar come off a two-decade top, though not by much. The dollar index was last at 104.560 and within spitting distance of the 105.010 peak.
The euro stood at $1.0394, having got as low as $1.0348 last week. The dollar did lose ground on the yen which seemed to get a safe-haven bid in the wake of the China data, slipping to 128.88 yen.
In cryptocurrencies, Bitcoin was last up 2% at $30,354, having touched its lowest since December 2020 last week following the collapse of TerraUSD, a so-called stablecoin.
In commodity markets, gold was pressured by high yields and a strong dollar and was last at $1,811 an ounce having shed 3.8% last week.
Oil prices reversed course as the dire Chinese data rekindled worries about demand.
Brent lost $1.22 to $110.33, while U.S. crude shed $1.04 cents to $109.45.