Official data released today by the National Bureau of Statistics show that China’s economy grew by 7.5% year over year in the second quarter. That’s a drop from the annualized 7.7% growth in the first quarter but exactly in line with the official government target of 7.5% growth for the year.
On Monday July 15 China is set to release its figures for second quarter GDP growth. The fear is that China’s growth rate will decrease from the 7.7% annual growth rate reported in the first quarter of 2013 to 7.5% or even lower. A drop below 7.5% would be a big deal since that is the government’s target for economic growth in 2013. A report of anything less than 7.5% would a sign that policy makers in Beijing are willing to sacrifice growth to other goals.
All it took to create today’s 1.4% gain was a speech by Federal Reserve Chairman Ben Bernanke saying that the Fed will keep its current “highly accommodative monetary policy for the foreseeable future.” Unemployment is still too high Bernanke noted and inflation too low. “Both sides of our mandate are saying we need to be more accommodative.”
China’s exports fell by 3.1% in June from June 2012. It’s the first drop in exports since the beginning of 2012 and the biggest monthly drop since October 2009. Imports fell by 0.7% in June after dropping by 0.7% in May. Economists had expected both imports and exports to rise by 6% and 3.7%, respectively.
Today the International Monetary Fund cut its forecast for global economic growth in 2013 to 3.1% in its semi-annual update of world economic growth. Back in April the forecast called for 3.3% growth. The IMF also cut its forecast for 2014 to 3.8% from 4%. The reduced forecast can be traced to emerging economies, according to the IMF, with slower growth in Brazil, Russia, India, and China.
Earnings season for the second quarter starts officially today when Alcoa reports. Analyst estimates call for S&P 500 earnings growth of just 1.8% this quarter. Far and away the highest expectations are for the financial sector where earnings are projected to grow by 17%. Take away that performance by financials and earnings growth for the rest of the S&P 500 is projected to drop by 1%.
