LIVE MARKETS-More China growth means less European, say Goldman
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MORE CHINA GROWTH MEANS LESS EUROPEAN, SAY GOLDMAN
Goldman's China team have upgraded their forecasts for the Asian economic giant's real GDP by 2.4% by 2029 and their European economists reckon that could imply a 0.6% hit to euro zone real GDP by 2029 as a result.
Normally one would think better growth in one bit of the world would be positive for their trading partners, and of course there are a lot of moving parts in Goldman's estimates, but they still think they net out negatively for Europe.
Firstly they think euro zone imports from China will increase by around 0.4 of a percentage point as a share of GDP by 2029, with around half of this translating into net losses of European domestic production and GDP.
The other side of that is they think cheaper goods would lower consumer prices and modestly boost real income and spending.
Secondly China's renewed manufacturing push would increase export competition, further challenging European products in overseas markets.
On their sums "each $1 rise in Chinese exports has reduced European exports by $0.2 to $0.3 over the last few years".
Lastly they think better growth in China could support activity in Europe at the margin, but "Chinese export and domestic demand growth have become progressively less reliant on foreign goods, pointing to limited demand spillovers since the post-pandemic reopening."
As a result they think their China upgrades imply as much as 0.6% of downside to euro zone real GDP by end-2029.
They think Germany will take the biggest hit, of 0.9%, while with Italy off 0.6% and France and Spain off 0.4%.
(Alun John)
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