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Unclear Metals Outlook on Sliding Economy
Jul 13,2012 11:47CST
smm insight
Source:SMM
According to data released by the NBS, China's GDP during 2Q was up 7.6%, falling for the sixth straight quarter, and the lowest in three years.

SHANGHAI, Jul. 13 (SMM) -- According to data released by the NBS, China's GDP during 2Q was up 7.6%, falling for the sixth straight quarter, and the lowest in three years. China's GDP rose by 7.8% during 1Q on the YoY basis based on comparable prices, also much lower than the same period last year. The truth is that domestic economy is now stagnant.

Domestic scale efficiency industry value added was up 10.5% based on comparable prices during 1H, with the growth down 1.1 percentage point compared to 1Q, and a drop of 3.8 percentage point compared to the same period of 1H. Fixed assets investment during 1H rose by 20.4% during 1H, with the growth rate down 0.5 percentage point compared to 1Q, and a retreat of 5.2 percentage point compared to the same period last year. Rapidly falling goods prices reflect that inflation problems are not the most emergent that China needs to cope with now, and China needs to take measures to stabilize economic growth instead. China's central bank increased RMB loans by RMB 919.8 billion in June, an increase of RMB 285.9 billion on the YoY basis. China's central bank unexpectedly announced it would lower interest rates July 5th, meaning the bank is not optimistic towards economic outlook. China's economy is experiencing recession, which will last for some time. Macroeconomy is expected pessimistic in 3Q, and will maintain downward track. China's central bank will likely take further stimulus policies in order to stimulate economic growth.

The US Federal Reserve announced the minute for June, showing many FOM Committee members believe further stimulus policies should be took by the Fed. But most Fed officials think current policies are favorable, causing expectations of more easing policies by the Fed to decrease and keeping the US dollar index firm. Moody's announced July 13th it will downgrade Italy's rating from A3, to Baa2, and maintain the outlook negative. Moody's said Italy's rating was downgraded owning to Spanish and Greek crisis.

With growing concerns over economic outlook, combined with sliding domestic economy and sluggish consumption, international capital flows to the US dollar for safety haven. Transactions of base metals are now cautious, and Shanghai metals prices should continue to fluctuate weakly.
 

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