China’s economy continues to recover from its contraction earlier this year, showing the economic benefits from swift control of the pandemic and a rapid resumption of manufacturing.
While Europe and the US face renewed surges of Covid-19 infections, in China factories are capitalizing on a global rush for medical equipment and work-from-home technology. That trend was underlined in trade data released Saturday. Inflation and credit reports for October due this week should also signal stable underlying demand.
China’s recovery on the back of successful virus control to date is indicative of the wider picture in Asia Pacific. Taiwan has seen its economy rebound, benefiting from stable domestic demand and buoyant exports to the US and China. South Korea, Japan, Australia and New Zealand are all, for now, recovering after seeing infection rates drop.
That contrasts with the current outlook in Europe, where the largest economies are locking down once more, and the US, where the case count is hitting records. The UK has already added stimulus to combat this new slump, and both the Federal Reserve and European Central Bank have said more is needed.
Meanwhile, China is effectively isolated from the rest of the world, with very few options to travel overseas and inbound travel banned or heavily restricted from an increasing number of countries.
While that separation is for pandemic control measures, further signs that the global economy is becoming less integrated are emerging. China’s economic plans for the next five years set out a greater focus on the domestic economy.
What Bloomberg Economics Say…
“China’s data will shed light on the strength of the economy’s recovery at the start of fourth quarter. Credit growth probably slowed sharply, but it would mainly reflect reduced business days due to the golden week holiday, not a sign of weakening momentum. Factory-gate deflation probably moderated while cooling food prices may have pushed consumer price inflation to below 1%.”
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Elsewhere, the ECB holds a virtual symposium, the UK reports third-quarter GDP data and central bankers in New Zealand, Egypt and Mexico set rates.
Click here for what happened last week and below is our wrap of what else is coming up in the global economy.
Europe, Middle East, Africa
Data this week will give a snapshot of the UK economy in the third quarter, as statisticians report growth and unemployment figures. With all parts of the country now in some form of lockdown, both are likely to paint a more rosy picture than the current reality.
Meanwhile, officials from the Bank of England, who boosted their bond buying plan this month, are out in force. Governor Andrew Bailey is due to deliver public comments on three separate days, and his colleagues Andy Haldane and Silvana Tenreyro are also scheduled to speak.
The ECB holds its annual forum — normally in the Portuguese hilltown of Sintra, this time virtual — entitled “Central banks in a shifting world.” President Christine Lagarde will give an opening speech on Wednesday, and will be joined by Fed Chair Jerome Powell and BOE’s Bailey for a policy panel on Thursday.
Markets will be watching developments in Turkey, where President Recep Tayyip Erdogan fired the country’s central bank governor on Saturday.
Egypt may hold interest rates on Thursday after cutting in late September, amid expectations of a slight uptick in price pressures.
US and Canada
In the US, the economic calendar includes the latest details on inflation, consumer confidence and job openings.
In Canada, Senior Deputy Governor Carolyn Wilkins, who is scheduled to leave the central bank in a month, is set to give a speech about life after Covid-19.
A summary of Bank of Japan opinions from its most recent meeting and a speech by a board member will shed light on the current state of thinking at the central bank, while bankruptcy and lending data out Tuesday will give the latest indications of how the BOJ’s virus response measures are supporting companies.
Korean jobless figures have given mixed signals recently, with a resurgence beyond the tech sector needed to generate more employment. New data are due Thursday. The Philippines will release GDP data on Tuesday and Malaysia will publish its figures on Friday.
On Wednesday, New Zealand’s central bank is expected to leave its main policy levers unchanged.
Mexico’s central bank meets Thursday, with policy makers potentially going for one more quarter-point cut to 4%. In the run-up to the decision, officials will get new inflation data and September industrial production will underscore the slack remaining in Latin America’s second-biggest economy.
Rock-bottom interest rates and a vast budget-busting income support program have already seen Brazil’s retail sales more than rebound from the pandemic. Wednesday’s report on September’s results should show further gains.
Closing out the week, Argentina reports October inflation, Peru’s central bank may hold steady at a record-low 0.25%, while Colombia’s retail sales data should show a pickup in demand with the economy coming out of a strict lockdown.
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