In today’s briefing:
- EA: Tight Economy Requires Hawkish ECB
- How Will Emerging Asia Fare in 2023?
- Cautious Optimism for China’s 2023 Growth Prospects
- China: Cautious Optimism for 2023 Growth Prospects
- The Commodity Report #85
EA: Tight Economy Requires Hawkish ECB
- The EA unemployment rate remains at a record low of 6.5%. A lack of rises among member states suggests a sharp turn isn’t imminent nor justified with vacancies high.
- The relative resilience of the EA labour market is extending its outperformance in the recovery. Still tightening conditions here sustain hawkish policy pressures.
- Wage settlements are rising from levels already inconsistent with 2% inflation, raising underlying inflation, which is more critical to policy-relevant horizons than spot HICP.
How Will Emerging Asia Fare in 2023?
- Post-Pandemic normalization in factor markets and government policy, as well as domestic and international political shifts, will work under the hood of the world order.
- Early 2023 will be difficult, but we expect global growth to hold better than expected due to China’s reopening, post-pandemic normalization, and technological change.
- A new asset pricing regime may result in financial stresses, as markets have yet to fully price in the end of the easy-money era.
Cautious Optimism for China’s 2023 Growth Prospects
- Dynamic zero-covid has been buried decisively, paving the way for an economic rebound. However, underlying weaknesses mean that the recovery will be a muted one.
- Consumption, investment, and export growth face significant headwinds arising from weak external demand and scarred investor and household sentiment.
- An accommodative policy stance towards business activity may offset some of the headwinds, but government capacity to implement expansionary policy is diminished.
China: Cautious Optimism for 2023 Growth Prospects
- Dynamic zero-covid has been buried decisively, paving the way for an economic rebound. However, underlying weaknesses mean that the recovery will be a muted one.
- Consumption, investment, and export growth face significant headwinds arising from weak external demand and scarred investor and household sentiment.
- An accommodative policy stance towards business activity may offset some of the headwinds, but government capacity to implement expansionary policy is diminished.
The Commodity Report #85
- In the world of natural resources, iron ore is probably the most China-centric commodity — even more than crude oil, copper or soybeans.
- Beijing accounts for more than 70% of the world’s imports of the mineral.
- Therefore it’s not hard to see that there is a direct correlation between Iron ore prices and the health of the Chinese economy.
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