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Global Supply Chain boost from China

Yesterday, China published economic growth data of 4.9% between July and September, and this is good news for the global supply chain. 

While large developed countries are struggling to cope with a second wave (Canada included), you would be forgiven for thinking that China has returned to normal. There is some way to go, but the government has done a number of things right - they were the first into the crisis and they are the first to come out of it. In September, Industrial production rose 6.9%, retail sales up 3.3% and the central bank of China’s prediction is 2% growth for the full year.

Their return to growth and manufacturing is good news for the supply chain. We all remember the disruption when China shut down. Raw materials and vital supplies were unable to reach key markets. Factories are producing again and domestic shopping is returning, boosted by confidence in consumers. Establishing consumer confidence has been a key focus for the government.

Question is, will it continue?

Meanwhile there are serious concerns from economists that  Europe will enter a double dip recession. They are revising their forecasts into negative territory after the second surge of pandemic takes hold. With governments introducing new national restrictions and local lockdowns, economists are concerned that the rising level of restrictions will starve the region of consumer confidence. 

This is counter to original forecasts by institutions like the IMF, when they were predicting a strong recovery after the injection of massive stimulus. The Financial Times crunched some numbers and by their numbers the 19 EU countries would face a budget deficit of 1 trillion euros this year. Next year’s shortfall forecast at 700bn (6% of GDP). Without consumer confidence, consumers will stay at home and businesses will not invest.

(Kevin Fairs)

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