All the day’s economic and financial news, including reaction to China’s latest growth figures
- Introduction: China beats forecast with 6.9% growth
- Retail sales, industrial production and investment also rose
- Experts: It’s a good sign for global growth
- MSCI World Markets index hits new peak
- Carolyn McCall named as ITV CEO
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Besides the key news headlines that you’d expect, there’s an at-a-glance agenda of the day’s main events, insightful opinion pieces and a quality feature to sink your teeth into each day.
If China’s GDP does hold up, then it could post its first year of faster growth since 2010.
Dan Wang, China analyst at the Economist Intelligence Unit, believes today’s growth figures bode well for the next six months….
China’s economy will hold up for the second half of the year, given sustained state-led investment and robust household spending. The monetary policy will remain neutral–cracking down shadow banking while increasing lending through formal banking channel.
Given the high base in 2017, however, to sustain high growth for 2018 will be tough.
The pound has fallen back from last week’s 10-month high this morning, as City traders fret about Brexit.
David Davis, Britain’s secretary of state for exiting the European Union, is back in Brussels for fresh talks with EU officials (although only one side had their paperwork on display…..)
UK-EU Brexit discussions continue apace today, with the relationship seemingly souring amid critical comments from Boris Johnson and a drive from France towards a hard Brexit.
There is now a clear need to get a transitional deal into place, with the negotiations looking ever more unlikely to conclude satisfactorily within the two-year deadline.
It’s official! Inflation across the eurozone eased a little last month.
The eurozone’s consumer prices index rose by 1.3% in June, says Eurostat, matching last month’s ‘flash’ estimate.
China’s growth figures are often treated with some scepticism.
Analysts often question whether the data can really be trusted, given the temptation to massage bad date and the sheer challenge of measuring economic output over such a huge economy.
It was the monthly data which impressed, with Retail Sales at 11.0% y/y posting its strongest growth since December 2015, and all the more robust given that this is a value not a volume measure, and CPI inflation has been very subdued in recent months.
Industrial Production ‘smashed’ forecasts at 7.6% vs. expectations of an unchanged 6.5% y/y, with the breakdown highlighting strength in ‘new economy’ (Telecoms/Computing 13.1% y/y vs prior 10.3%), Pharmaceuticals (13.6% vs./ 10.75) and the volatile / seasonal Food sector 11.0% vs. 7.6%), while resource processing sectors’ output remains subdued, which can only be considered to be healthy.
UK construction companies are rubbing their hands with glee this morning after winning contracts for Britain’s new HS2 high-speed rail line.
Shares in ITV have jumped to the top of the FTSE 100 leaderboard, after the broadcaster snaffled Carolyn McCall from easyJet to be its next CEO.
“In a very impressive field of high-calibre candidates, Carolyn stood out for her track record in media, experience of an international operation, clear strategic acumen and strong record of delivering value to shareholders.
I’m delighted we’ll be working together at ITV.”
European stock markets have opened higher, thanks to China’s growth figures.
Overnight there was a quartet of important Chinese figures, led by a better than expected 6.9% GDP reading.
That was joined by a far stronger than forecast industrial production number, an 11% increase in retail sales year-on-year and solid fixed asset investment figure.
China takes in a lot of raw materials, to drive its factories and underpin its infrastructure spending.
Craig James, chief economist at Commonwealth Securities in Sydney, says China’s latest growth figures may indicate that the world economy is holding up.
He says (via Reuters):
“(The new data) is encouraging for global growth as well because China is the second largest economy on the planet.”
“Based on this data, there is no need for easing and no need really for tightening either because inflationary pressures are very much contained. So I think the People’s Bank of China just continues to be watchful.”
As China goes, so go emerging markets. Its solid growth reinforces recoveries for commodity exporters and keeps 2017’s pick-up in global growth on track,”
China Q2 GDP was firmer than expected (6.9%y/y, cons 6.8%, prior 6.9%), driven by a sizeable pick-up in industrial production. Sentiment was dampened by the Stats Bureau’s acknowledgement that H1 economic growth was “hard won”.
Our Asia strategist calls that an understatement to be sure; GDP growth was clearly buffered by significant credit expansion to ensure headline growth remained at or above target. Most recognise the dangerous imbalances/can-kicking involved in China’s growth strategy.
The news that China’s GDP beat expectations drove shares up across Asia, although ironically Chinese investors didn’t share the enthusiasm.
The Hong Kong Hang Seng rose by 0.3%, while Korea’s Kospi and India’s Sensex gained almost 0.4%.
Hurray, new week, new record! MSCI All World has just hit fresh ALL-TIME high as econ momentum in China boosted optimism for global growth. pic.twitter.com/CDGMGESa0K
This after six years of slowing, suggesting successful management of stimulus.
“It’s reverse psychology,” said Hao Hong, managing director and head of research at BOCOM International. “If everything is fine, you don’t have to inject liquidity. But if they’re injecting liquidity, something must be wrong.”
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China has got the new week off to a good start, by releasing growth figures that beat City expectations.
Overall, the economy continued to show steady progress in the first half…but international instability and uncertainties are still relatively large, and the domestic long-term buildup of structural imbalances remain.