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What will Chinese trade data tell us about the economy?

What will Chinese trade data tell us about the health of the economy?

Trade data slated for release on Wednesday will give markets a better read on how domestic and foreign demand have held up for the world’s second-largest economy.

Economists polled by Bloomberg have forecast a year-on-year drop of 7 per cent in the dollar value of China’s imports in November and a 4.4 per cent dip in imports, both of which would mark substantially sharper falls than in October.

Overshadowing the data is China’s approach to managing the coronavirus. Chinese authorities have stopped short of any explicit changes to President Xi Jinping’s zero-Covid approach but analysts say the language in official statements has eased following a wave of nationwide protests criticising top leaders for sticking with the economically disruptive policy when the rest of the world has long since moved on.

The outlook for exports in particular has darkened based on recent readings from both official and independent purchasing managers’ indices in China, which revealed a marked decline in export orders last month as concerns mounted over growth in the US and Europe.

“Weaker external demand is another headache for Chinese exporters,” said Iris Pang, chief economist for Greater China at ING. “With even weaker external economic growth projected for 2023, it seems that there will be no immediate reversal of the weak trend for Chinese exporters any time soon.” Hudson Lockett

Has US producer price inflation cooled further in November?

US producer price rises are expected to ease in November, providing fresh evidence that the Federal Reserve’s drive to bring down inflation is working.

According to a survey of Bloomberg economists, the Bureau of Labor Statistics on Friday is forecast to report that producer prices rose 7.1 per cent in November from the prior year, which would mark its slowest increase since May 2021. Excluding the volatile food and energy sectors, producer prices are expected to have risen by 5.8 per cent, a step down from 6.7 per cent in October, and the slowest pace since June 2021.

PPI measures what producers are paid for goods and services by wholesalers, showing trends in prices several stages before they reach the consumer. The consumer price index is more closely watched, but investors and economists are looking carefully at all data for any signs of changes in inflation.

The report will precede the Fed’s next policy meeting at which the central bank is widely expected to slow the pace of its interest rate increases, delivering a 0.5 percentage-point raise after a series of four consecutive 0.75 percentage-point increases. Kate Duguid

What will Turkey’s CPI data show about the central bank’s efforts to control inflation?

Turkey’s red-hot inflation may show signs of cooling when the statistics agency releases its latest data on Monday, more than a year after the central bank began slashing interest rates and driving up prices.

Annual inflation is expected to have fallen to 84.7 per cent in November, according to a Reuters poll, from 85.5 per cent in October. That would mark the first decline in consumer price inflation in 18 months, as month-on-month price rises begin to slow, economists said.

Turkey still has one of the highest inflation rates in the world after its central bank has repeatedly cut its benchmark this year under pressure from president Recep Tayyip Erdoğan. The central bank has lowered rates by a cumulative 10 percentage points since late 2021 in an effort to boost the economy with cheap loans. The last cut came on November 24 and Turkey’s benchmark rate now stands at 9 per cent.

“This is not disinflation once you remove the base effect,” said Enver Erkan, chief economist at Tera Securities in Istanbul. “Disinflation would require the conviction to implement policies to fight inflation. Instead, we have loose monetary policy because the priority is growth, which means inflation will continue to be a problem.”

Erdoğan wants rapid economic growth to help his chances in an election next year. He argues the unconventional view that high interest feeds inflation, rather than slows it, and has said a weaker currency will boost exports and create jobs. The lira has lost almost 30 per cent of its value this year, hitting record lows against the dollar.

But his experiment may be running out of steam. Gross domestic product expanded 3.9 per cent in the third quarter, the statistics agency said last week, a sharp slowdown from a 7.7 per cent expansion in the previous quarter. And the cost of living crisis has driven support for Erdoğan’s ruling party to historical lows as more middle-class Turks see their income fall below the poverty line, which stands at an average of about $1,300 a month for a family of four.

“Slower inflation does not mean that the income-eroding price increases will stop. When you go to the supermarket to cover your basic needs, you will continue to face higher costs,” said Erkan. Ayla Jean Yackley

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