Finimize - 💼 China got back to business

What’s going on here?

China’s economy bloomed by 5.3% last quarter from the same time last year, beating the expectations of 4.6%.

What does this mean?

It seems the Chinese government’s efforts to push cash around the country have finally had an impact. Hefty stimulus packages injected some life back into the industrial sector, not least because the government is pushing for more goods to be made on the country’s own soil instead of abroad. A decent dose of orders from foreign countries and a chunk of investment didn’t hurt, either. Still, it looks like it'll take more than that to convince investors that China’s back on track: the CSI 300 and Hang Seng, two of the country’s major indexes, fell by 1.1% and 2.1% respectively on Tuesday.

Why should I care?

Zooming in: No wonder investors have doubts.

The infamous property market – which has sent ripples through the economy, in part by impacting homeowners’ financial confidence and spending habits – has still been flashing red. Cement production was down 22% in March versus the same time last year, the biggest drop since records started in 1995, indicating a stall in the number of homes being built. Plus, China invested 9.5% less into the property sector last quarter than the same time last year, enough to dampen the impact of better spending in the manufacturing and infrastructure sectors. So if China doesn’t put its money where its mishaps are, there’s little chance of the economy-bruising property market sorting itself out.

The bigger picture: You can’t beat a sale.

China’s manufacturing industry has gone a little too hard on renewables, producing more solar panels, batteries, and electric vehicles than the local market knows what to do with. The country’s now selling them abroad at impossibly low prices, and European and US companies can’t compete. Tesla, for example, had to delay the launch of its low-cost model and fire staff because sales have suffered.

What’s going on here?

The UK unemployment rate crept up – but because wages did too, the Bank of England (BoE) has some head-scratching to do.

What does this mean?

British companies have axed more jobs than expected recently, pushing the unemployment rate up to 4.2% between December and February. That’s the highest level in six months, signaling that the heady job market might be taking a breather and potentially encouraging the BoE to consider interest rate cuts. Mind you, wages are still increasing more than economists would like, only slowing their pace to 6% from the previous reading of 6.1% – and that could push the central bank away from rate trims. Now, that disconnect might be down to unreliable data: the survey that underpins those numbers has previously had its results paused due to low response rates. Either way, the contradictory statistics will make it hard for economists to accurately assess the UK job market – and even harder for the BoE to take action.

Why should I care?

For markets: More money, more problems.

Higher wages can feed into consumer prices, potentially stalling or undoing the central bank’s progress with inflation. After all, that may already be happening in the US. But so long as unemployment is increasing, employers will have more power to keep wages capped without losing applicants to a competitor. If that trend keeps up and slows the rate of wage growth, the BoE might be able to revisit rate cuts this summer.

The bigger picture: Take your economics with a pinch of salt.

Economic statistics will turn out widely different depending on how the data is collected and processed. Time lags, the type of methodology used, seasonal adjustments, and one-off factors all have an impact. Case in point: data’s been less reliable since the pandemic, when it became harder to collect in the usual ways, leading to unrepresentative samples, more frequent updates, and a lot of guesstimates to fill the gaps.