China snips key lending rate as economy tumbles; retail sales jump

China’s central bank ramped up its monetary stimulus to help spur the economy amid signs of a weakening property market, a slump in business investment, and record joblessness among young people. 
 

The People’s Bank of China lowered the rate on its one-year loans — or medium-term lending facility — by 10 basis points to 2.65 per cent, the first reduction since August. That’s likely to prompt banks to lower their lending rates next week. 

The move came shortly before official data showed economic activity weakened in May. Growth in industrial output slowed to 3.5 per cent from 5.6 per cent in April, while retail sales grew 12.7 per cent, below expectations. Fixed asset investment by private businesses contracted in the first five months of the year, while property investment deteriorated further.    

The unemployment rate remained relatively elevated at 5.2 per cent in May, while the jobless rate for young people between the ages of 16 and 24 rose slightly to 20.8 per cent, a new record high since data became available in 2018. The central bank has shifted to an easing mode after the economy lost momentum since the first-quarter’s post-pandemic surge. 

Sri Lanka’s economy shrinks 11.5% in Q1 as crisis continues

Sri Lanka’s economy shrank 11.5 per cent in the first three months of 2023, official data showed on Thursday, as the country remained in the grip of its worst financial crisis in decades. The downturn was driven by high inflation and high interest rates, the rising cost of components, as well as restrictions on imports and lower earnings from apparel exports, Census and Statistics Department said. The agriculture sector grew 0.8 per cent from a year earlier, while output from industries contracted 23.4 per cent and services dropped 5 per cent, the department said. Its central bank projects that GDP will shrink by 2 per cent this year. 

Blinken to begin China visit today

Secretary of State Antony Blinken will travel to Beijing from June 16-19, becoming the most-senior US official to visit the country in five years as the US looks to ease tensions that have provoked fears of 

open conflict. Bloomberg

New Zealand slips into recession

Reuters 

Wellington

New Zealand slipped into recession as the economy shrank in the first quarter, data showed on Thursday, reducing the risk the central bank would need to hike interest rates further but creating a new headwind for the government’s re-election hopes.

Gross domestic product (GDP) matched analysts’ expectations of a 0.1 per cent contraction in the March quarter but was well below the Reserve Bank of New Zealand’s (RBNZ) forecast of 0.3 per cent growth. Weakness in the economy was broad-based with output from half of the country’s industries contracting, according to the Statistics New Zealand data. Growth was hurt by the impact of two major cyclones and flash floods in Auckland in January and February.