(SPONSORED) — As the world recovers from the pandemic, the public continues to struggle to keep up with high costs. As China reopens from COVID lockdowns it will have significant impacts on the economy in 2023. Director of Data-Driven Economic Strategies (DDES) Tatiana Bailey explains.
One of the events Bailey is paying attention to for 2023 is the reopening of China. After nearly three years of a virtual shutdown, China has reopened and experts are saying that after the current COVID surge and after three years of self-imposed restricted growth, China may have significant positive growth rates later in 2023 and 2024.
The good things according to Bailey are that Chinese consumers buy U.S. goods, and their increased ability to go out and spend will boost our exports. With the U.S. importing more than they export, China resuming their purchase of our goods will help the trade balance.
However, there is a negative said, Bailey. China is the most populated country in the world and they consume a large portion of the world’s commodities like oil, grain, and steel. A fully active and mobile Chinese consumer back in full force during most of 2023 will have impacts on prices.
“Estimates are that for oil alone, China reopening will increase prices by 25% this year,” said Bailey.
Natural gas prices rising are ominous for Europe mentions Bailey. A dampened Chinese demand for natural gas has enabled Europe to stockpile liquefied natural gas which has helped mitigate the negative impacts of the Ukrainian crisis. As China reopens there is greater demand for natural gas supplies.
Bailey said, “So although it’s good news that US manufacturing and small business surveys have shown some downward trend in prices, China reopening represents a material threat to that.”
As Bailey explains the Federal Reserve, which has already stated it is not likely to pivot to lower interest rates in 2023, may have to hold interest rates higher for a longer period of time.