The Chinese economy is still struggling due to negative factors.

The Yuan weakened slightly due to the announcement of a 21.4% drop in industrial profits in China since the beginning of the year. Data from the National Bureau of Statistics showed that industrial profits fell more than expected by 12% and increased by only 8.5% compared to the same period last year which is the most significant decline since mid-2020 during the COVID-19 outbreak.

The revealed numbers on Tuesday indicate that China's manufacturing activity which serves as an economic indicator can continue to operate despite being lower than pre-COVID levels. Domestic and international demand remains a significant challenge for this sector amidst the bleak economic conditions in China's largest market.

Although China's industrial production expanded by 3.9% in March, according to data released earlier this month, the figure was slightly lower than the estimated 4% growth, which missed the market's forecast for two consecutive months.

The weakness in the industrial sector highlights the uneven recovery of the Chinese economy this year. Although demand for services and travel is expected to recover quickly after lifting the COVID-19 lockdown, the recovery of the manufacturing sector remains mostly sluggish.

Recently, the Chinese economy has been expanding more than expected with a growth rate of 4.5% in the first quarter of the year, driven largely by a rebound in consumer spending. However, analysts are still skeptical about whether this momentum can be sustained especially as the manufacturing sector is struggling to recover.

Some analysts predict that China's export sector will continue to be weak, as the US economy is expected to experience an economic downturn with consumer confidence in the US falling to its lowest level in nine months in April.

Koon Chow, Head of Asia Research at ANZ, said that "while China's domestic recovery is good this year, the recovery is driven more by domestic factors than exports" and he is uncertain whether China's export demand will increase soon, despite government plans to support it and he expects these factors to weigh down the value of the yuan.

Meanwhile, the US economy is still expected to show strong growth in the first quarter, with computer and electronic orders rising 1.9% in March and appliance orders surging 0.8%.

Recently, the United States reported that durable goods orders increased by 0.1% in March while orders for metal goods also increased by 0.1%. However, orders for basic goods that are still waiting to be delivered have continued to decrease. This indicates that economic activity may receive less support from these factors in the future.

Most economists expect that business equipment spending may slightly decrease in the first quarter of 2023 after a drop in the fourth quarter of 2022. The US government will release the GDP figures for the first quarter today and economists polled by Reuters predict that GDP may grow by 2.0% in the first quarter when annualized, after growing by 2.6% in the fourth quarter of 2022.

Technical analysis data (5H)

Resistance: 6.9275, 6.9328, 6.9410

Support: 6.9140, 6.9058, 6.9005

Source: Investing.com

 

Pivot Points April 27, 2023 06:51 PM GMT+7