Weekly Market Recap
Gettin’ in tune
Week in review
- Australia preliminary retail sales -1.8% m/m in June
- ECB keeps policy rate unchanged at 0.0%
- Eurozone consumer confidence dips to -4.4 for July
- Australia 2Q CPI inflation
- U.S. 2Q real GDP growth
- U.S. Fed Funds rate and FOMC meeting
Thought of the week
When it comes to China, much of the rhetoric is either about its fantastic rate of growth or the impending doom from elevated debt and risky credit. Neither is the case. The pace of Chinese economic growth dropped from 18% y/y in the first quarter of the year, to 8% in the second quarter as the pandemic-induced comparisons subsided. There were excited gasps from corners of the market about an over correction in policy as the credit impulse slowed sharply (see chart) and the cut in the reserve requirement ratio was cited as further evidence. The reality is that China has recovered from the economic effects of COVID and is returning to more normal levels of economic activity. Both the domestic and external sectors of the economy have shown resilience in recent months. Any musician will tell you the importance of keeping your instrument in tune, and Chinese officials have had a lot of practice in fine-tuning the policy levers to keep the economy humming along.
China’s credit impulse
% of nominal GDP, change year-over-year
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