| Dear *|FNAME|*
China
There are signs China’s economy may be turning a corner after COVID disruptions. GDP grew a steady 3.0% in the second quarter, up from 2.5% growth in Q1. This suggests economic activity is starting to stabilize as pandemic impacts fade. Retail sales also picked up in June, rising 0.5% year-over-year after a sharp drop in May, pointing to recovering consumer demand.
Exports rebounded strongly in June, up 7.3% amid improving global growth and resolution of supply chain bottlenecks. The job market remains challenging, but unemployment has come off its highs earlier this year. Inflationary pressures also look to be easing based on June’s consumer price data.
While risks remain, including from recurring COVID outbreaks and global recession worries, the government has reiterated its 5.5% full-year GDP growth target. Key to achieving providing measured stimulus and policy support and because of accomodative Government we remain bullish on Chinese equities.
For investors, the steadying growth trajectory and potential for further opening of the economy present opportunities. Sectors like retail, travel, and manufacturing could see upside as consumption recovers. Continued infrastructure spending will also benefit materials and commodities.
In summary, China appears to be through the worst COVID-driven economic impacts. While risks remain, stabilization of growth and targeted stimulus measures could boost investment prospects in the second half of 2023. China’s economy seems primed for a gradual recovery.
US Inflation
The June CPI report released yesterday came in below expectations, the first such positive surprise in over 18 months. Headline CPI rose 0.2% month-over-month, below forecasts of 0.3%, while core CPI also increased 0.2% versus an expected 0.3% gain. On an annual basis, headline CPI slowed to 3.0% from 4.0% in May, and core CPI decelerated to 4.8% from 5.3%, marking the lowest readings since October 2021. |
