China's Economy Shrank

China's Economy Shrank

almost 4 years ago2 mins

Data out on Friday showed China’s normally imposing economy shrank by 6.8% in the first quarter versus the same time last year – its first decline since records began 😲

What does this mean?

Economists predicted China’s economy would shrink, sure, but not by as much as it did. Turns out consumers were slow to splash their cash even when some businesses reopened in March: retail sales, for instance, were down 16% last quarter versus a year ago 🛍 Still, it wasn’t all bad news: the country’s industrial production shrank by a better-than-expected 1% as its factories sprang back into action, and its unemployment rate in March fell from February’s record high.

Source: Bloomberg
Source: Bloomberg

Why should I care?

Chinese consumers typically account for a third of the world’s luxury purchases, so the country’s return to business – slow though it is – bodes well for the world’s biggest luxury conglomerate, LVMH 🇨🇳 The company said as much late last week, revealing that sales of some of its brands were up by more than 50% in late March and early April. That influx of luxury shoppers is a rising tide which is lifting several boats: not only did LVMH’s shares climb on Friday, those of Gucci-owner Kering and cosmetics brand L’Oreal did too – with the latter saying that despite falling global sales last quarter, China’s recovery will mean this quarter’s are stronger.

Source: Markets Insider
Source: Markets Insider

There are limits on how quickly China’s economy can grow in the next few months given that international buyers of its wares – including major customers in the US and Europe – are still effectively closed for business 🔒 It’s probably no bad thing, then, that the Chinese government has said it’ll cut interest rates further in order to encourage domestic spending, as well as help banks lend extra to companies that are getting less international business than they’re used to.

Daily Brief Image
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG