Data Avalanche To Keep Spotlight On Rate Hike Expectations
XM Group | May 13, 2022 10:04AM ET
China slowdown fears will likely intensify
The week will kick off with the monthly dump of data out of China, which might attract more attention than usual this time as the lockdown measures introduced in March in the country’s largest city – Shanghai – have yet to be lifted. Moreover, the shutdowns have now spread to Beijing and the government does not seem to be ready to abandon its zero-Covid policy that many see as unsustainable.
With growth prospects fading fast, investors are increasingly concerned that a sharp slowdown in China will drag on growth in the rest of the world where interest rates are on the rise and consumers are feeling the pinch of higher living costs. According to the forecasts, next week’s releases will only add to the gloom.
Industrial output growth is expected to have been near stagnant in April, cooling from 5.0% year-on-year in March to just 0.4% y/y. More worryingly, consumer spending likely slumped in April as retail sales are projected to have fallen by 6.1% y/y. The only bright spot is fixed asset investment, which is expected to have held up at a relatively healthier reading of 7.0% y/y between January and April.
However, amidst the warnings of a correction in America’s housing market, the latest housing starts and building permits (both out on Wednesday), and existing home sales (Friday) will also be of interest for investors.
The dollar is likely to draw further bullish support if there are no troubling trends in the US economic barometers that are scheduled for the next seven days. Although, regardless of any surprises in the upcoming data or any fresh panic episodes in the markets, a small pullback is looking overdue for the greenback after the recent strong gains.
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