Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Evening Standard
Evening Standard
Business
Michael Hunter

City fears of global slowdown mount as China’s rebound falters

Worries about a global slowdown reverberated around the City and the world today, after official numbers from China showed the world’s economic powerhouse was barely growing.

The concern came at the start of a key week for UK data, with inflation expected to stay above 8% even after 13 consecutive rate hikes from the Bank of England.

China’s lacklustre numbers undermined hopes that a strong rebound there after the end of Covid restrictions could help energise the wider global economy, with a wave of pent-up demand. For the second quarter, China’s gross domestic product rose by just 0.8% from the previous three months.

The latest expansion was sharply lower than the 2.2% seen between January and March. Although it was higher than the 0.5% forecast,  the reading dashed hopes that the kind of growth rates from the early part of 2023 could remain part of the economic outlook.

London is home to a range of multinational resource and mining companies that depend on demand from China for the metals that they produce. They were among the biggest fallers on a retreating FTSE 100. Chilean copper giant Antofagasta fell 28p to 1509p and Anglo American lost 41p to 2309p.

City worries on the global outlook came at the start of a week when the main domestic economic threat will dominate the agenda: Inflation.

The UK Consumer Price Index, out on Wednesday, will shed light on how much work the Bank of England has left to do to tame inflation ­– which was at 8.7% on an annual basis last time, even after 13 consecutive rate hikes ­– and is forecast to ease to 8.2% for June when out this week.

Michael Hewson at CMC Markets predicted that the inflation numbers “probably won’t alter the calculus around a quarter-point rate hike by the Bank of England in 2 weeks’ time, however a strong number could increase the pressure to go bigger and hike by a half-point, which for now looks the most likely outcome.”

The BOE’s last meeting took the base rate to 5%, with a half-point rise.

The impact of the BOE’s long run of hikes on hard-pressed households was highlighted today by the Resolution Foundation. The think tank focused on low-and-middle-income families said today that interest rate rises “have caused household wealth across Britain to fall by £2.1 trillion over the past year,” the biggest drop in household wealth since World War II.

Resolution said there are 1.7 million households expected to re-mortgage next year, with their repayments expected to rise by an average of £3,000.

With China less likely to provide a boost to the global economy and the difficulties closer to home coming back into view, it could be a tense week in the City around the half-way point for 2023.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.