Goldman Sachs has revised its forecast for China’s economic growth from 3.3 percent to 3 percent for this year. The bank attributed the revision to weaker than expected data for July and a tight energy supply.
Bloomberg noted in a report on the news that the July data showed a deepening housing crisis combined with continued Covid restrictions, topped by a recent unexpected decision by the central bank of the country to cut interest rates.
Slower economic growth for the world’s powerhouse would mean a softening in oil prices, which would be very welcome by other large consumers who have been trying for months to bring prices down with limited success.
Indeed, Brent crude and WTI have been trading below $100 for more than a week now, amid thickening clouds over global economic growth. There have been a number of reasons for this but economic data suggesting a slowdown in China has been among the bigger ones.
China also reported weaker refinery runs and imports for July, even though it continued building its oil inventories.
Goldman is not the only one getting increasingly pessimistic about China’s growth prospects, either. Per the Bloomberg report, Nomura also revised its forecast for the country’s GDP, a lot more substantially than Goldman, reducing it from 3.3 percent to 2.8 percent.
“Beijing will likely do more to arrest the slowdown, but rolling out a comprehensive stimulus package is of low probability in a year of government reshuffle, while the need for maintaining zero Covid makes conventional stimulus measures much less effective,” the bank’s economists wrote in a note.
Dutch ING Groep and Canada’s TD Securities also revised down their economic outlook for China in the last few days, signaling that pessimism is spreading across the analyst community as China continues battling Covid flare-ups following its zero-Covid policy and a housing downturn with developers defaulting on bond payments and struggling to complete paid-for apartments.
By Charles Kennedy for Oilprice.com
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