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World Bank still optimistic on China’s economic growth, forecast 8.5%

The World Bank has had its credibility dented by this from last week:

  • World Bank leaders, including then-Chief Executive Kristalina Georgieva, applied “undue pressure” on staff to boost China’s ranking in the bank’s “Doing Business 2018” report
Link here more on that ….
Moving along though, the World Bank’s East Asia and Pacific Fall 2021 Economic Update
  • China’s economy is projected to expand by 8.5%
  • the rest of the region is forecast to grow at 2.5% (nearly 2 percentage points less than forecast in April 2021)
  • “The economic recovery of developing East Asia and Pacific faces a reversal of fortune”
  • “Whereas in 2020 the region contained COVID-19 while other regions of the world struggled, the rise in COVID-19 cases in 2021 has decreased growth prospects for 2021.”
I think developments in China have worsened since the bank researched for this piece:
Evergrande, power shortages, factory layoffs ….
  • Chinese media says to expect a crackdown on high coal prices – citing power shortages, cuts to factory output
  • Goldman Sachs has cut its China 2021 GDP forecast to 7.8% (from 8.2% previously)
The World Bank has had its credibility dented by this from last week:

Nomura slashes China 2021 growth forecast to 7.7% from 8.2% previously

Nomura cuts its forecast for China’s growth this year

The firm cites the impact of factories pausing operations amid power outages and the ongoing push on environmental policies as the key reason for the downgrade.

“Over recent weeks, a surging number of factories across China have been forced to cease operations due to higher coal prices hitting power supplies and government mandates to meet carbon emission reduction targets.”

Adding that this will put downwards pressure on growth, alongside curbs on the property sector which have resulted in the Evergrande situation seen currently.

Fitch cuts its China 2021 GDP forecast to 8.1% (from 8.4%)

Fitch ratings citing the property slowdown

  • “deleveraging dynamics” weighing on recovery
  • government policy is being recalibrated
  • housing to take a toll on domestic demand, global commodities
Fitch says more broadly that challenges to EM growth in 2022 are rising.
So the world’s second-largest economy is only going to grow at 8.1%?
We are all doomed (sarcasm).

Ifo institute cuts Germany 2021 GDP growth forecast to 2.5% from 3.3% previously

Ifo reveals their latest projections on the German economy

  • Lifts 2022 GDP growth forecast to 5.1% from 4.4% previously

The think tank attributes the downgrade this year to supply chain disruptions for the most part, slowing down the recovery from the pandemic. Adding that:

“The strong recovery from the coronavirus crisis, originally expected for the summer, is further postponed. Industrial production is currently shrinking as a result of supply bottlenecks for important intermediate goods. At the same time, service providers are recovering strongly from the coronavirus crisis. The biggest risks causing uncertainty for the outlook are the increased number of coronavirus infections and significant delivery and production bottlenecks which are particularly affecting German industry.”

It needs to be said that the upgrade to 2022 may also be called into question in the months ahead if global supply chain disruptions continue to persist to year-end, which it will.

Atlanta Fed GDPNow estimate for 3Q growth cut to 3.6% from 3.7%

Model dips after details of retail sales today

The Atlanta Fed GDPnow estimate for third-quarter growth has dipped to 3.6% from 3.7% after today’s retail trade report the residential investment component was a negative influence as was exports.

The high watermark for the models estimate came in at 6.2% back on August 17. The 3.6% level today is tied with other levels from September 13 and September 14.
Model dips after details of retail sales today_

German Ifo institute expects 3% inflation this year, between 2% to 2.5% in 2022

Ifo provides some projections on German inflation

That’s relatively modest given that we’re already seeing German annual inflation near 4% in August, with many forecasters seeing a push towards 5% before year-end.
In any case, the high readings for 2022 somewhat reaffirms potential sentiment that inflation pressures may not necessarily ease too much going into next year.
The fact that supply chain disruptions and bottlenecks are to persist well into 2022 makes the case for high inflation to stay the course for many more months to come at least.

German economy ministry says GDP growth to pick up significantly in Q3

Remarks by the German economy ministry

  • Q3 GDP growth to pick up significantly after 1.6% q/q growth in Q2
  • GDP growth likely to normalise in Q4
Peak conditions in the early stages of the summer sets up a good look for Q3 performance but the latter stages are pointing to moderation in overall conditions, even more so in the outlook as optimism fades and pent-up demand abates.
While a return to renewed virus restrictions may not be on the cards, there are still worries on the spread of the delta variant which is keeping a cloud over the outlook in Q4.

German economy ministry says GDP growth to pick up significantly in Q3

Remarks by the German economy ministry

  • Q3 GDP growth to pick up significantly after 1.6% q/q growth in Q2
  • GDP growth likely to normalise in Q4
Peak conditions in the early stages of the summer sets up a good look for Q3 performance but the latter stages are pointing to moderation in overall conditions, even more so in the outlook as optimism fades and pent-up demand abates.
While a return to renewed virus restrictions may not be on the cards, there are still worries on the spread of the delta variant which is keeping a cloud over the outlook in Q4.
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