The Aftermath of El Nino Weather // China Re-Confirms 5% GDP Growth Target
The Commodity Report #145
China Re-Confirms 5% GDP Growth Target
China set a growth target of “around 5%” for 2024, according to the “Government Work Report” released Tuesday as part of the opening of the National People’s Congress annual meeting.
Last year China’s economy grew by 5.2%, matching the official target of around 5%.
China set a deficit-to-GDP ratio of 3% for the year, down from a rare upward revision to 3.8% late last year from the original 3%.
The work report also said Beijing will issue 1 trillion yuan ($138.9 billion) in “ultra-long” special treasury bonds this year to fund major projects aligned with national strategies, while 3.9 trillion yuan of special-purpose bonds for local governments will be issued this year, 100 billion yuan more than last year.
Many participants in the commodity sector waited for another fundamental trigger event for raw material prices to re-accelerate again. Arguably strong China demand has been the missing link. Time will tell if China’s reconfirmation of its 5% GDP growth target will be this trigger. The 5% target came in line with market expectations - so currently we find it hard to view this statement as a net positive for commodity prices going forward.
The Aftermath of El Nino Weather
Global sea surface temperatures -- over the global extrapolar ocean, from 60 degrees south to 60 degrees north -- were at a record high 21.06 C in February, according to EU data. Typically, global average daily sea surface temperatures reach their highest level for the calendar year in March before falling again with a slight increase in July and August.
Besides warmer temperatures, Europe saw a wet February, especially from the Iberian Peninsula to western Russia, and over the UK and Ireland, southern Scandinavia, and the Alps.
Drier-than-average conditions were observed across North America, the Horn of Africa, the Arabian Peninsula, south-central Asia, most of southern Africa, South America, Australia and most of the Mediterranean countries - all heavily influenced by the weather phenomenon El Nino
Extreme weather events -- heatwaves, floods, droughts and wildfires -- have been on the rise in the past few years. Doesn’t matter if you believe in climate change or not - nobody can dismiss the data and the fact that extreme weather events increased over the past couple of years. This fact worked as one of the primary drivers for many commodity prices in the past and also going forward.
In Other News…
While drought conditions in Brazil remain a problem - the rainy season hasn’t brought the amounts of much-needed rain that it usually does in the main ag growing regions - the rainfall over Brazil's coffee areas in Jan and Feb was normal for the period, right there with historical averages, according to Pharos Consultancy.
United States farm income dropped notably in 2023 alongside lower prices for many major commodities, but remained well above the historic average, according to USDA.
This week look out for the following:
CPIdata on Tuesday
PPI and Retail Sales data on Thursday
10 and 30-year bond auctions on Tuesday and Wednesday
Empire State Manufacturing Index and UoM Consumer Sentiment on Friday
A subscription costs $29 a month, and you will receive an additional in-depth report every Sunday evening at 6:00 PM CEST. Moreover - you will receive a quarterly economic growth report as well. That information will only be published to members and not the general public.
Till next Monday, Lukas
If you have any questions in the meantime, please feel free to contact me via Twitter or Mail.