China’s GDP slows down significantly

China’s GDP growth fell to +4.9% yoy in Q3, but more importantly, GDP grew by only 0.2% qoq compared to the 2%+ variations in the summers prior to the 2020 crisis. Anti-Covid measures weighed on growth in August and power cuts took over to depress industrial activity in September. This can be seen from the monthly data: yoy growth in retail sales rebounded from 2.5% to 4.4% in September, while industrial production declined from 5.3% to 3.1%. Growth is now expected to be affected by the housing market crisis, despite the support measures put in place to avoid a collapse, and the effects of this crisis will be long-lasting.

Equity markets fell in Asia, especially as bond yields rebounded on Friday on the back of strong September retail sales in the US and a surge in commodity prices. Household confidence still fell in the US, however, due in part to shortages of goods that are putting pressure on prices.

New US figures are expected today: industrial production in September and the NAHB housing market index, before capital flows in the evening. The dollar is gaining ground (EUR/USD below 1.16) with the US 10-year yield back above 1.6%.