China Cuts Interest Rate as Growth Risks Worsen With Omicron
Bloomberg reports China Cuts Interest Rate as Growth Risks Worsen With Omicron
China’s central bank cut its key interest rate for the first time in almost two years, bolstering an economy that’s losing momentum in the face of repeated virus outbreaks.
The 10 basis-point reduction was announced shortly before data showed gross domestic product grew 4% in the final quarter of 2021 from a year earlier, higher than the 3.3% rise projected by economists but slower than in the previous three months.
Consumer spending took a notable dive in December as the government tightened virus controls in several parts of the country. An outbreak of omicron-variant virus cases in January, including in Beijing now, will further curb sentiment.
“Growth will continue to be weighed down by the property sector and of course the zero-Covid policy that China is going to continue with,” Sian Fenner, lead Asia economist at Oxford Economics, said in an interview on Bloomberg TV. “Retail sales numbers are still quite telling that the zero-Covid policy is still wearing on consumers, and we haven’t seen the recovery that we’ve been seeing in the industrial sector.”
- Industrial output rose 4.3% y/y in December, versus the median forecast of 3.7%. For the full year, it went up 9.6%\
- Retail sales increased 1.7% y/y in December from 3.9% in November and versus an estimate of 3.8%. Total sales rose 12.5% in the year
- Fixed-asset investment rose 4.9% y/y in 2021. Property investment was up 4.4%, infrastructure investment gained 0.4% and spending in the manufacturing sector climbed 13.5%
- The jobless rate rose to 5.1% at the end of December from 5% in the previous month
- The economy expanded 1.6% on a quarter-on-quarter basis in the final three months of the year, faster than a revised 0.7% in the previous three months
China is cutting rates with GDP allegedly up 1.6% for the quarter.
Policy Intents Conflated With Outcomes
Few believe China GDP statistics.
China posts a GDP target and generally hits it despite questionable economic reports, electrical use, etc., and with a property sector implosion.
Slowing Global Economy
China did not decoupled from the global economy in 2007 and the US won't in 2022.
For discussion, please see US GDP Forecasts Stumble Then Take a Dive After Retail Sales Data.
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