According to recent data, China's economy will improve more in the second half of 2020, as soon as the pandemic is under control.
The National Bureau of Statistics reported that manufacturing activity in China is now almost the same as the level recorded last March 2019. As a result, futures on stock indices jumped up, and demand for risky assets returned. Unfortunately, oil did not respond to this news. However, this is just because of the serious oversupply in the market. The good rise in China's industrial production is directly related to fewer layoffs during the outbreak, unlike Europe and the United States.
According to data, compared to March 2019, industrial production in China in March this year fell by only 1.1%. Economists expected it to fall by 7.5%. However, if compared to February, production actually increased by 32.13%.
Unfortunately, such rapid growth should not be expected in the US, where the labor market has shown the largest decline since the Great Depression in 1930, and the situation with the pandemic has not yet been taken under control. The decision of authorities to reopen the economy now by all means may only lead to the re-outbreak of the pandemic.
Comparing its figure to the same period in the previous year, the volume of retail sales in China decreased by 15.8% in March this year. As a result, China's GDP in the 1st quarter fell by 6.8% per annum. Therefore, compared to the 4th quarter of 2019, the economy dipped by 9.8%. Nevertheless, China's economy is expected to improve in the 2nd quarter of 2020.
Authorities have repeatedly stated that if necessary, they will introduce new measures to overcome the impact of the pandemic. Now, the focus is to increase domestic demand by stimulating investment and consumption, as employment in China as a whole remains at a stable level.
Since the COVID-19 pandemic in China is practically defeated, a larger jump in economic growth is expected. The prominent positive changes in March this year, as well as the positive performance this April may further delight investors. Although it is difficult for China to maintain its own growth amid the difficulties caused by the pandemic, long-term fundamental indicators, such as China's growth potential, have not changed.
Meanwhile, the European currency, like other risky assets, rose against the US dollar. The data released yesterday concerning the US economy led to the update of the weekly lows of EUR/USD and GBP/USD.
According to the report, last week, another 5 million Americans applied for unemployment benefits. In just a month, more than 22 million people asked for help.
The sharp decline in construction growth in March this year is directly related to the slowdown in housing activity due to the pandemic. According to the US Department of Commerce, this March, new home sales decreased by 22.3%, and amounted to 1.216 million units per year. Economists expected it to fall by 15.6% and amount to 1.35 million per year. However, comparing it to March 2019, sales actually increased by 1.4%.
Manufacturing activity in many states also continues to decline at a record pace. According to the Federal Reserve Bank of Philadelphia, business activity for April this year decreased to -56.6 points. Fed spokesman Robert Kaplan said that he expects the economy to contract significantly in the 2nd quarter of this year from 25% to 30% per annum, and recovery will only begin in the 3rd quarter of 2020. In addition, unemployment will peak at about 15%, and end this year at around 8% -10%. Overall GDP for 2020 will fall by 4% -5%.
Meanwhile, for EUR/USD, the pair grew during the Asian session, partially compensating the losses recorded yesterday. Unfortunately, it did not lead to the reversal of the downward trend. Thus, bulls need to strengthen their positions above 1.0850, as doing such will allow them to push the pair to the highs of 1.0910 and 1.0970. However, if pressure on risky assets returns, support will be provided at the level of 1.0815, where the breakthrough of which will quickly return the pair to the April lows in the area of 1.0770.