While the data on the Chinese economy turned out to be better than expected, positive news is also expected this week from the United States and Europe. This means that the chance of a recession seems to be getting smaller and smaller. “There are plenty of challenges ahead for the rest of the year.”
The Chinese Bureau of Statistics published preliminary figures for economic growth in the first quarter last week. Figures from America and Europe will follow this week. ‘Pluses are expected for Germany, France, Italy. That is positive’, says Han de Jong, BNR’s house economist. Growth figures of 0.1 or 0.2 percent are expected for the eurozone.
Germany
The German economy contracted by 0.4 percent last quarter. ‘A new negative figure would officially indicate a recession because you then have two quarters of negative growth,’ says De Jong. And that while there is no question of high unemployment, something that is often associated with a recession.
Premature
However, there is no question of breathing a sigh of relief yet, he says. ‘That seems a bit premature to me, there are enough challenges for the rest of the year.’ For example, European figures on business confidence in April were published last week. According to De Jong, there are remarkable differences. ‘Entrepreneurs’ confidence was already weak and has weakened further. And in the service sector the opposite happens, strong confidence only gets stronger. It can’t stay that way.’
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Industry is smaller than the service sector, but is nevertheless ahead. ‘If the picture in that industry continues to be the same, the services sector will eventually also weaken,’ thinks De Jong. He estimates the chance of a recession for a number of countries to be more than 50 percent. ‘Just look at Taiwan. It has an early-cyclical economy with a strong dominance for electronics and exports. Orders in March are lower there, respectively 30 and 25 percent lower than a year ago. That may be a result of all the lockdowns in China. But normally that is a harbinger of bigger problems.’
China
The reopening of the Chinese economy can provide global relief, De Jong thinks. “It’s an important industry. If activity there picks up at a rapid pace this year, it could be a strong boost for the global industry. And we can also benefit from that.’
ING
At the same time, ING is taking China’s largest bank to court. It concerns the Industrial and Commercial Bank of China, according to ING, that bank would have violated contract conditions. ING now wants compensation of USD 170 million. ‘ING claims that delivery has been made, but payment has not been made,’ says De Jong.
