While the packed US economic calendar will dominate markets this week, for Australia China will be another thing to watch as the monthly and quarterly economic data releases start amid the worst outbreak of Covid ever in Shanghai and some other major cities.
In fact the rapid expansion of Covid across more and more of China has seen the country under pressure to control that growth, let alone meet the demands of President Xi JinPing’s zero policy which is looking increasingly irrelevant.
Given the importance China is to Australia – even in the current period of strained political relations – the data dump over the next week will set up a tougher economic outlook for whoever wins the May 21 poll.
The impact of the latest Covid emergency has already started emerging as it hit Chinese car sales in March. Data for the month, released at the weekend showed an impact from the early weeks of the current Covid outbreak, dropping car sales 11% from a year ago, reversing February’s 18% gain.
Shanghai is still locked down and economists estimate this is cutting billions of dollars a week in lost retail sales, manufacturing and other activity. Other cities and towns are also locked down, especially in Jilin provide, one of the first hotspots for the recent wave.
Ports are reported to be running slowly in and around Shanghai and other coastal cities.
In the next week running through Easter up till next Monday we get Chinese inflation, trade, industry production, urban investment, retail sales, property sector sales, house prices and the economic growth data for the March quarter.
There will be some early signs of the impact in retail sales and in exports and imports (but the real impact will be seen in April).
China’s March consumer and producer data will be out today and economists are looking for rises in both because higher oil and petrol prices were allowed in mid-March.
Lower pork prices might offset a little of the impact of higher import costs but the big imponderable will be any early impact from Covid depressing prices at a retail level.
Headline inflation could reach an annual 1.2% in March from 0.9% in February. Annual growth in producer prices could go back over 10%, again.
Core consumer inflation will not rise very much though and some analysts say April could see a big drop thanks to the impact of the lockdowns.
Wednesday sees trade data for March and the first quarter and a further slowing in growth is forecast (again April will see much worse figures).
Higher prices for key commodity imports such as oil and gas, coal, iron ore, copper and other metals and some grains will boost the value of imports but actual volumes are seen weaker because China always seems to cut back when world prices soar, as they have done since late February.
GDP, industrial production, investment and retail sales data will be out a week today (and during our Easter holidays) and will be mixed.
In fact economists are uncertain about what will happen because of the distinct slowing in the pace of activity in late February through March as the impact of the Covid upsurge started being felt, especially with lockdowns and restrictions in Jilin and Guangdong provinces and in Shenzhen (as well as nearby Hong Kong).
The retail sales and industrial production data will show early signs of the impact of the slowdown.
In Australia the election campaign will dominate headlines but life for markets, investors and the economy will continue.
Like the US and Europe, it’s a short week with Easter break effectively starting Thursday and ending next Tuesday.
In Australia, the NAB business conditions survey for March (tomorrow) is likely to show conditions and confidence remaining reasonably solid, consumer confidence (Wednesday) is likely to see a bit of a lift from the Budget and jobs data (Thursday is likely to show a 20,000 gain in employment with unemployment falling to 3.9% which will give a brief lift to the election campaign.
There’s one local profit – Bank of Queensland’s interim on Wednesday.
Elsewhere the RBNZ on Wednesday is expected to raise its cash rate by 0.25% taking it to 1.25% and the same day, the Bank of Canada will lift its policy rate by a larger 0.50% to 1% and get in before the Fed starts its series of half a per cent rate rises.
In Europe the ECB (on Thursday) is expected to leave monetary policy on hold but is likely to be a bit more hawkish with the further rise in inflation despite increasing threats to growth.
And the US sees consumer and producer price inflation released, industrial production (all for March), consumer sentiment, retail sales (for March) and the start of the March quarter earnings season with reports from some major banks (See separate markets story).
