Analysis of the world economy: the Chinese crisis worsens at the end of the year

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(Bloomberg) – China’s Covid Zero policy may be coming to an end, but the world’s second-largest economy will get worse before it gets better.

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Forecasters expect gross domestic product to slow further before recovering in 2023. Chinese residents are increasingly pessimistic about the job market and their incomes, and housing is still largely unaffordable.

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The crisis in China spilled over to Hong Kong, where exports fell in November by the biggest in nearly seven decades. In South Korea, semiconductor production fell the most last month since the global financial crisis, reflecting the weakening momentum of recovery in a country closely linked to the global economy.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

China

China’s removal of the last of its Covid brakes will likely further disrupt the economy in the first quarter as infections rise, while raising the possibility of a faster and stronger rebound in growth next year. , said economists.

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Chinese residents have seen their confidence in the job market and their incomes fall to new lows, while interest in buying homes has also fallen as the economic slowdown has deepened this year. The October-December survey added to already gloomy third-quarter data, which also gauged weak prospects for jobs and housing markets.

Policymakers have waged an unprecedented assault on China’s housing market, but on the key measure of affordability – so central to President Xi Jinping’s « common prosperity » push – the results are mixed. For all the pain inflicted on bondholders and property companies, housing remains stubbornly expensive in the world’s most unaffordable market. Buyers wonder if it was all worth it.

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Greater Asia

Hong Kong’s exports fell the most in November in nearly seven decades as the slump in China’s economy and global demand deepened, making the road to recovery even more difficult for the financial hub. Overseas shipments fell 24.1% last month from a year earlier, the worst drop since 1954, while imports fell 20.3% in November from a year earlier – the biggest drop since 2009.

South Korea’s semiconductor production in November fell the most since the global financial crisis, weighing on the country’s industrial output and indicating a further cooling in foreign demand for technology components as the global economy slows. Chipmakers are recalibrating their investment plans as they brace for lower demand for their products, both at home and abroad.

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WE

The U.S. merchandise trade deficit narrowed in November to the lowest since December 2020 due to a drop in imports. The deficit narrowed by 15.6% – the most since 2009 – due to a general decline in imports, which was driven by a 13% fall in the value of consumer goods.

U.S. pending home sales fell for a sixth month in November to the second-lowest on record as higher borrowing costs and an uncertain economic outlook kept many would-be buyers away of the market. The National Association of Realtors index of contract signings for previously owned homes fell 4% last month to 73.9, the lowest outside of the pandemic in data dating back to 2001, according to a statement released Wednesday.

Europe

Amid a bleak economic outlook, falling real wages and a creaking National Health Service, there is growing evidence that the country’s young working-age people are suffering from long-term health problems that prevent them from working at increasingly alarming rates.

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Spanish inflation slowed for a fifth consecutive month in December, nearly halving since mid-year as energy costs continue to fall in the eurozone’s fourth-largest economy.

Emerging Markets

Vietnam’s economy has grown at the fastest pace in Asia this year, signaling momentum just before risks of a global slowdown began to materialize. The better-than-expected results give Vietnam’s central bank room to wait and watch before deciding to pivot monetary policy away from tightening.

Brazilian analysts raised their benchmark interest rate estimates after President-elect Luiz Inacio Lula da Silva won approval for a $32 billion spending plan. The benchmark Selic rate will end next year at 12%, down from an earlier estimate of 11.75%, according to a weekly central bank survey released on Monday.

World

In 2022, central banks raised interest rates in the biggest way in a generation and policymakers did not disappoint in the last week of the year, with Tunisia rising 75 basis points and Uruguay increasing by a quarter point.

—With help from Maria Eloisa Capurro, Nguyen Dieu Tu Uyen, Jill Disis, Sam Kim, John Liu, Yujing Liu, Ana Monteiro, Reade Pickert, Augusta Saraiva, Alonso Soto, Liza Tetley and Fran Wang.