On Tuesday morning, the Shanghai Composite Index and Hong Kong’s Hang Seng fell as data published by the Chinese National Bureau of Statistics showed that the country’s Gross Domestic Product (GDP) grew by 3% in 2022, recording one of the slowest growth rates in the last decades.
Commenting on China’s GDP growth, Goldman Sachs analysts suggested that the quick reopening of the economy has put a strain on its expansion. “The ongoing ‘exit wave’ on the back of China’s faster-than-expected reopening has taken a heavy toll on economic activity in recent months due to surging infections, a temporary labour shortage and supply chain disruptions,” they have noted in their report.
China’s December retail sales beat economists’ expectations, falling only 1.8% on a year-to-year basis. The figure was significantly better than the decline of 8.6% forecast in a poll conducted by Reuters.
Bank of Japan to decide on interest rates
The Bank of Japan’s (BoJ) governing board will meet to discuss its interest rate policy on Wednesday. Market analysts expect the BoJ to keep its benchmark interest rate unchanged. Economists at Bank of America Global Research suggest that it could scrap its yield curve control policy, adding that “in our main risk scenario where the BoJ scraps Yield Curve Control (YCC), we think that TOPIX could decline up to 3% in the near term, with key rate-sensitive sectors, such as banks, potentially outperforming.”
Canada CPI inflation likely to have dropped in December
One of Tuesday’s most important financial data releases will be December’s Canadian Consumer Price Index (CPI) report. Economists expect the annual headline inflation to fall to 6.3% from 6.8% recorded in November.
The Bank of Canada (BoC) has been tightening its monetary policy to achieve the 2% inflation target. Some economists suggest that the BoC’s governing board will keep hiking interest rates, with 60% of them anticipating a 25 basis points raise at the upcoming policy announcement on Wednesday January 25th.
On January 12th, the Canadian dollar hit a seven-week high against the US dollar, boosted by rising oil prices and falling US inflation.
Has the UK CPI inflation slowed down in December?
As the UK economy is one of the strongest in the European continent, its CPI inflation data due to be released early on Wednesday January 18th will surely attract attention. The Office for National Statistics (ONS) is expected to publish its December CPI inflation report. Market analysts forecast that UK inflation will come in at 10.6%, a tad lower than the 10.7% figure recorded in November.
Market participants seem to welcome the inflation’s slowdown after hitting a record-high of 11.1% in November. Reports published by the ONS indicate that the UK’s Producer Price Inflation (PPI) has also been subsiding.
Although some economists believe that CPI inflation has reached its peak, it is still forecast to remain in double-digit territory. In order to control inflationary pressures, the Bank of England (BoE) has raised its benchmark interest rates. Economist and member of the BoE’s Monetary Policy Committee (MPC) Catherine Mann suggested that the central bank is not at the point in its interest rate-rising cycle where it needs to worry about the risk of over-tightening.
World Economic Forum starts
The World Economic Forum (WEF) is back, taking place in Davos, Switzerland, for the first time after 3 years. More than 2,700 world leaders from 130 countries, including 52 heads of state and government, will be attending the WEF’s annual meeting.
A poll conducted among economists showed that the majority of 22 chief economists surveyed by the WEF believe a global recession is likely in 2023. In addition, most of them suggest that the US and Europe will experience weak or very weak economic growth this year.
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