The forecast for China reflects the country's sluggish property sector, weak domestic demand generally, and reluctance among policymakers to ease fiscal policy.

Quarterly GDP growth in China slowed to 0.7 per cent in the second quarter this year, and to 4.7 per cent on a year-on-year (YoY) basis.

China's growth outlook has weakened because of a persistent property downturn and low consumer and business confidence.

Despite this, policymakers are refraining from significant macroeconomic policy easing, especially on the fiscal front, leaving the economy vulnerable to downward pressure on prices and profit margins, S&P Global Ratings said in a release.

Key economic indicators suggest a soft third quarter. Export growth has remained strong. But slow growth in retail sales reflects weak consumer confidence and a trend toward cheaper products.

Investment momentum has slowed amid the real estate slump and weaker investment growth in other sectors. In all, industrial production growth slowed in the first two months of the third quarter.

Weak domestic demand is weighing on prices and profit margins. The GDP deflator fell by 0.7 per cent in Q2 2024. Core inflation dropped to 0.3 per cent in August and there appears to be downward pressure on wage growth.

The risk of problematic systemic deflation—when falling prices and wages reinforce each other and drag down economic activity—has risen. In the short term, say the next six months, the main external risk is slower global growth. In the medium term, it is accelerated supply-chain adjustment and large barriers to trade and investment by major trade partners.

Meanwhile, Asia-Pacific growth remains largely intact, driven by a continued export recovery and, in most emerging markets (EMs), solid domestic demand.

Regional central banks are unlikely to cut rates aggressively because of relatively low interest rates compared with the United States and domestic considerations.

Elevated interest rates and inflation are weighing on spending power in several developed economies.

In most EMs, the restrictive monetary stance hasn't hurt domestic demand much because credit growth has remained solid.

S&P Global Ratings foresees mostly solid growth, especially in the Asian EMs.

In India, GDP growth moderated in the June quarter as high interest rates temper urban demand, in line with the company’s projection of 6.8 per cent GDP for the full fiscal 2024-25. The July budget confirmed that the government remains committed to fiscal consolidation and to keeping the focus of public expenditure on infrastructure, it noted.

Japan's GDP grew solidly in the second quarter, from the first. Household consumption was weak in the first half of 2024 as inflation weighed on real incomes. But rising wage growth is starting to bring improvement on that front.

S&P Global Ratings revised down its forecast for Japan’s 2024 GDP growth by 0.6 percentage point. It expects significant growth in the coming quarters in the country.

In Australia and New Zealand, elevated interest rates and inflation continue to weigh on consumption and investment.

In Australia, a resilient labour market and strong immigration mean that GDP growth has remained positive. S&P Global has nudged down its 2024 GDP growth forecast for the country, but slightly raised the 2025 projection.

In New Zealand, the labour market is weaker, and unemployment has moved higher. The most recent readings suggest a sequential improvement in consumer and business confidence, which may indicate a gradual bottoming out of economic conditions.

In South Korea and Taiwan, quarter-on-quarter GDP growth slowed in the second quarter following an export-led growth spurt in the previous quarters. In both cases, the slowdown stemmed from softer domestic demand.

S&P Global slightly lowered its 2024 growth forecast for South Korea, but revised it up for Taiwan, and in both economies, it sees an acceleration compared with 2023.

Southeast Asian growth has remained generally solid, benefiting from the export recovery and robust domestic demand. The company has revised up its growth forecasts for Malaysia, Singapore and Vietnam.

The Indonesia outlook remains unchanged, while that for Thailand has been reduced.

Fibre2Fashion News Desk (DS)