China's slowdown is a warning to the world

Economic slowdown, inflation, stagflation, energy crisis - such returns seem to appear more and more often in market commentaries. The concerns expressed in this way may justify the latest data from the Chinese economy.

According to the Chinese statistical office today, China's economy grew at a rate of 4,9 percent. in the penultimate quarter of 2021 on an annual basis. Meanwhile, in the second quarter of this year. the growth rate was 7,9%, and the market consensus assumed GDP growth in Q5,2 at XNUMX%.

What can hold back economic development?

The main cause of the slowdown seems to be a combination of several factors: the real estate crisis caused by the insolvency of the second largest developer in China, the energy crisis and power shortages and price increases, and finally component shortages and supply chain interruptions.

Data on the decline in China's GDP may spoil the sentiment in global markets, as a slowdown in the gigantic economy may soon translate into a slowdown in the United States, Europe or other regions of Asia.

We can observe the reflection of concerns on the stock exchanges. Today in the morning the Japanese Nikkei futures fell by almost 0,7 percent to 29000 points. Contract for German DAX dropped by 0,1 percent, and the Nasdaq 100 futures fell by 0,3 percent, below 15100 points. The contract for the VIX fear index is above 17 points.

The price of oil continues to rise

Due to the energy crisis and China's declaration of purchasing energy resources at all costs, crude oil may continue to rise. Moreover, the USA, Australia and some Asian countries are trying at the same time to lift pandemic restrictions and facilitate travel, which is to stimulate tourism and thus air traffic. This may additionally affect the increase in fuel demand. As a result WTI crude oil prices are already climbing to $ 83,4 per barrel, the highest level since October 2014.

Expensive oil also means probable problems with inflation later on, which around the world may not be as temporary as originally assumed by central bankers, and in turn the increase in energy costs, in addition to inflation itself, may ultimately lead to stagflation as production may start to decline.

Inflation in New Zealand will force interest rate hikes?

NZD / USD exchange rate It appeared to be picking up markedly when it was announced that New Zealand's inflation had picked up its fastest pace in ten years. However, the initial increases have already been largely abated and the rate is in the region of 0,7060. The annual inflation rate in New Zealand jumped from 3,3 in the second quarter to 4,9%. in Q50, exceeding forecasts and increasing expectations for another interest rate hike by XNUMX basis points in November by Reserve Bank of New Zealand.

Analysts are still debating whether faster inflation in New Zealand is now a temporary phenomenon due to supply chain disruptions caused by the coronavirus pandemic, or something more permanent. A similar dilemma seems to concern almost the entire world today.