This is it! This is the moment many have been waiting for since China said they’d managed to control the COVID-19 outbreak and would start reopening the economy.
How much of an impact did the outbreak have on the world’s second-largest economy?
Well, we’ll get a really good idea of that tomorrow.
Chinese GDP data is not just relevant to its major trade partners this time around. Analysts are trying to figure out how much impact the COVID-19 outbreak will have on world economies. So, they will be interested in using the Chinese figures to get a general idea of the effects of lockdowns.
Expectations are for China’s impact from the virus to have been less than in other countries. This is given their relative number of cases and the fact that an important part of their economy still continued through the outbreak.
What We Are Looking For
There is a universal consensus that GDP figure will be the worst result in decades, plunging significantly into negative territory.
Just how negative, though, is where there isn’t as much of a consensus. Given the unprecedented situation, it’s understandable that there will be some disagreement in projections. We should take this into consideration when anticipating the market reaction following the data release.
The other thing is that this data isn’t likely to just have a quick market reaction. As prior data from China shows, it can shift market sentiment. Beyond an immediate reaction to a beat or miss of estimates, we could see a protracted shift in the markets as Europe and the US open for trading.
So, What Are the Projections?
Several surveys show different expectations from economists.
A survey carried out by AFP showed the most modest expectation of the effect of the coronavirus, projecting a -4.6% growth in the first quarter. At the other end is the latest poll by Reuters, which projected that the Chinese economy shrank by 8.2% in the first quarter.
Within that range, a consolidation of the projections leads to around a -6.5% result for Q1.
In any case, all of these projections show the worst performance since records began. From that, there is a projection that China’s economy will grow just 1.7% this year.
This is a far cry from the over 6.0% it has managed for decades.
It’s Not Over Yet
Towards the end of the quarter, there was increasing hope that China would have a quick recovery. The country had reopened production after getting its infection numbers down.
However, that hope evaporated as countries around the world came to a standstill, halting orders of non-essential products from China.
Yes, Chinese factories can open, but with most of the world now on lockdown, China is headed for its second quarter of poor economic performance.
Already, authorities are warning of containers piling up in US and European ports. Orders made in late February and early March are arriving, but can’t exit ports.
This is a similar situation to what China experienced a month earlier, once again raising the specter of a threat to supply chains.