The global market's week began with the publication of fresh Chinese data for the third quarter on the country's industrial potential and gross domestic product (GDP).
Formally, the growth rate of China's economy slowed by far, from 7.9% year-on-year in the second quarter of 2021 compared to the second quarter of 2020 to 4.9%, which could theoretically be attributed to the energy crisis signs that caused a sharp increase in fuel prices, problems in supply chains, as well as some decline in investment activity in the local real estate market in course of Evergrande developer default-threatening saga. However, it is unlikely that such an expert assessment would be fair.
Most likely, the false effect of a higher base was simply formed by a very successful Chinese third quarter in 2020 compared to the collapse of the first and second quarters of the pandemic bottom for the economy in 2020, which experienced the peak of the consequences just at that period.
China, where strict lockdowns did not last for a long time, slowed down less than Europe or the U.S.
If the first quarter of 2020 led to a decline of 6.8% in China's GDP, then the next quarter of 2020 had an increase of 3.2%, in terms of the summarised year-on-year output.
And last year's third quarter was already almost normal for the Chinese economy's pace, having reached exactly the same speed as today's 4.9%, in comparison with GDP for 2019.
There is nothing surprising or particularly negative in the fact that the growth of the Chinese economy slowed in Q2 2020 in percentage terms if it is compared to the quick pace of growth of Q3 2020: in absolute money terms, calculated in any currency, the Chinese economy does not look like it is stagnated or that it is losing momentum at all.
The second quarter gave stronger percentage value +7.9% only compared to the weaker Q2 2020, and the current +4.9% were based on relatively stronger Q3 2020 figures.
The recovery could go even faster if the supply chains could withstand the hyping acceleration of demand to the full measure. Manufacturers and resellers, as well as end consumers, all strive to "cheat" inflation, managing to deal with all possible super volumes before prices for materials rise even more.
Thus, inflation increases demand, but it is not able to speed up the operation of physical machines or indefinitely expand transportation capacities. So, that's not a slowdown, but rather a lack of acceleration.
The most important thing for observers in the financial markets news is that there is no lack of demand, that's why even high energy prices, which are slowing down supplies, are not suppressing production yet.
Such a point of view is also confirmed by a synchronous increase in Chinese industrial production by 11.8%, the impressive increase purely from the beginning of the year, from January to September, were excepted from the same official release.
So, statistics is a smart and sometimes tricky thing, it could often be interpreted in different manners. However, the local stock market also perceives things more or less positively: the major Shanghai Composite continental index (SSEC) declined only by less than 0.85% during the first opening hour of today's trading, and it played back almost losses before the day's close, as the final indication for SSEC resulted in -0.12%.
That means most investors actually have a neutral attitude to the released data.
The rest of the investment background this week is mainly influenced by the reporting season on Wall Street. Since the beginning of the corporate reporting season, corporate profits already exceeded expert estimates on Reuters by an average of 16% compared to the average of 4% for several five years on the same indicator.
Also, all of the S&P 500 companies are expected to post around 32% profit growth in this quarter compared to last year. Among the most famous companies that are going to report this week will be Johnson & Johnson (JNJ), Procter & Gamble (PG), Philip Morris International (PM), United Airlines (UAL), Netflix (NFLX) on Tuesday, IBM, Nestle (NESN) and Tesla (TSLA) on Wednesday, AT&T (T), Dow (DOW), American Airlines (AAL), Intel (INTC), L'Oreal (OR), PayPal (PYPL), Southwest Airlines (LUV), Snap (SNAP) on Thursday, American Express (AXP) and Honeywell (HON) on Friday. However, the attention will probably be focused not only on revenues and profits, but especially on the CEO's words for each company about how they are coping with increased inflationary costs, and whether they expect some decline or growth in sales in this regard.
Queen Denise Keza, analyst at Esperio broker
