Weak trade data for China has left investors expecting more doom and gloom with next week’s release of second-quarter numbers, and according to Lombard Street Research, the world’s second-largest economy could shock markets with a quarter-on-quarter contraction in gross domestic product (GDP).
“Global markets could be due for a shock,” Charles Dumas, an economist at Lombard Street Research said in a research note on Wednesday.
“Assuming the trade data are taken at face value, rather than some obscure adjustment being needed for the dodgy data vis-a-vis Hong Kong, there is an even chance that on our estimation procedure next week’s real GDP will be down rather than up from [first quarter],” he said.
Monday’s GDP data will be keenly watched by investors aware that the days of double digit growth are firmly behind China. A Reuters poll predicts a 1.8 percent quarter-on-quarter rise and a 7.5 percent rise on a yearly basis. That would be slowest pace of growth (year-on-year) since the third quarter of last year. But Dumas believes these figures could be generously overstated.