This past week, China posted first-quarter gross-domestic-product growth of 4.5%, up from the prior quarter’s 2.9%, as retail sales surged at the fastest pace in two years and home sales in major cities rose. Analysts expect the recovery to continue through the second quarter, supporting Chinese stocks. The
iShares MSCI China
exchange-traded fund is up 5% year to date.
But some doubt a longer-term consumer-fueled recovery. While the wealthy can spend on luxuries, most consumers aren’t buying big-ticket items like travel or cars, says Shehzad Qazi, managing director at China Beige Book. Qazi says consumer spending has never sustainably driven growth in China, and it’s unlikely to this year. Weaker inflation highlights companies’ lack of pricing power, and youth unemployment at 19.5% is near pandemic levels.
TS Lombard’s chief China economist, Rory Green, notes workers’ real income grew just 3.8%, below GDP growth and half the prepandemic trend. Consumer confidence is below pre-Covid levels, he writes. While home sales are recovering, sales in central China fell 8%, and 3% in western China. Smaller cities make up the bulk of home sales, he says.
Marko Papic, chief strategist at Clocktower Group, says he’s worried about the health of Chinese consumers. Households have been in deleveraging mode since 2017—dramatically since 2022—with consumers saving more than borrowing, he says. Household debt is at 100% of disposable income, up from 20% in 2009. China, he says, could be facing secular stagnation, much like the U.S. after the financial crisis. And that doesn’t factor in rising geopolitical tensions with the U.S.
Write to Reshma Kapadia at reshma.kapadia@barrons.com
Next Week
Monday 4/24
Ameriprise Financial,
Brown & Brown,
Cadence Design Systems,
Coca-Cola,
and
First Republic Bank
release earnings.
Tuesday 4/25
3M,
Alphabet,
Biogen,
Chubb,
Danaher, Dow,
General Electric,
General Motors,
Halliburton,
Kimberly-Clark,
McDonald’s,
Microsoft,
Moody’s, MSCI,
NextEra Energy,
PepsiCo,
Raytheon Technologies,
Texas Instruments,
United Parcel Service,
Verizon Communications,
and
Visa
report quarterly results
The Census Bureau reports residential sales data for March. Economists forecast a seasonally adjusted annual rate of 632,000 new single-family homes sold, slightly fewer than in February.
The Conference Board releases its Consumer Confidence Index for April. Consensus estimate is for a 104.1 reading, roughly even with the March data.
S&P CoreLogic releases its Case-Shiller National Home Price Index for February. Expectations are for home prices to be flat year over year. Early 2012 was the last time the index didn’t show an annual increase.
Wednesday 4/26
American Tower,
Automatic Data Processing,
Boeing,
Boston Scientific,
CME Group,
eBay,
Edwards Lifesciences,
General Dynamics,
Humana,
Meta Platforms,
Norfolk Southern,
Old Dominion Freight Line,
Pioneer Natural Resources,
ServiceNow,
and
Thermo Fisher Scientific
announce earnings.
The Census Bureau releases the durable goods report for March. New orders for manufactured durable goods are expected to increase 0.7% month over month to a seasonally adjusted $270 billion.
Thursday 4/27
The Bureau of Economic Analysis releases its preliminary estimate of first-quarter gross-domestic-product growth. The consensus call is for GDP to have grown at a seasonally adjusted annual rate of 1.8%, following a 2.6% increase in the fourth quarter, and 2.1% for all of 2022.
AbbVie,
Altria Group,
Amazon.com,
Amgen,
Bristol Myers Squibb,
Capital One Financial,
Caterpillar,
Comcast,
Eli Lilly,
Gilead Sciences,
Hershey,
Honeywell International,
Intel,
International Paper,
Mastercard,
Merck,
Mondelez International,
Newmont,
Northrop Grumman,
S&P Global, and
T-Mobile US
hold conference calls to discuss quarterly results.
Friday 4/28
Charter Communications,
Chevron,
Colgate-Palmolive,
and
Exxon Mobil
release earnings.
The BEA reports personal income and outlays for March. Income is forecast to increase 0.2% month over month, while spending is seen declining 0.1%. This compares with gains of 0.3% and 0.2%, respectively, in February. The core personal-consumption expenditures price index is expected to increase 4.5% from a year earlier, one-tenth of a percentage point less than previously.
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