🇨🇳 China's seeing a shrink

What’s going on here?

The OECD said on Wednesday that the global economy might have little to flaunt this year.

What does this mean?

These might not be the breeziest days of your life, but compare them to the full-scale doomsday scenarios that have been batted around this year and you’ll see that the global economy’s actually held up alright. But the World Bank just won’t let us relax, warning that the world’s economies are in a “precarious state” and headed for major rate-hike-induced slowdowns. And as if that wasn’t depressing enough, the OECD has jumped on the bandwagon. The organization upped its global growth forecast to 2.7%, given China’s more relaxed Covid rules. Thing is, if you take out pandemic-hit 2020, that’s still the lowest annual rate since the 2008 financial crisis.

Why should I care?

For markets: Decision time.

Relentless interest rate hikes are a main culprit, it’s true, but the OECD reckons lingering inflation’s still a big risk too. That’s why it’s urging central banks to stay tough until headline inflation and core inflation – which strips out volatile food and energy costs – come back to target. But the OECD predicts that inflation across the G20 countries will stick at 6.1% this year and 4.7% the next. So all eyes will be on the big dogs next week: the Federal Reserve’s expected to pause hikes, while the European Central Bank’s suspected to be gearing up for another hike.

The bigger picture: Time to see a shrink.

China’s a picture of economic weakness right now, not just because of the country’s internal problems. See, China makes up about a quarter of the world’s manufacturing output, so its export numbers tell you a lot about the rest of the world too. And May’s weren’t good: Chinese exports shrank much faster than expected, with a hefty 7.5% slump from the same time the year before.

What’s going on here?

European clothing colossus Inditex gave a masterclass in pulling off tidy quarterly results on Wednesday.

What does this mean?

When the going gets tough, the shoppers stop spending. But Inditex – the clothing powerhouse that owns the likes of Zara, Pull&Bear, and Massimo Dutti – is showing just how to keep the cash rolling in. The fashionista has ruthlessly shut down its less profitable stores, with its total tally of shopfronts falling 17% since 2019, focusing its attention on zhuzhing up the money-making ones instead. And despite cheaper online rivals like Shein racking up more market share, Inditex’s lifted prices of its cheaper offerings up roughly 20% in the past year. So even though its Russian business is kaput and labor costs are on the rise, Inditex still hoisted profit up a better-than-expected 54% last quarter from the same time last year.

Why should I care?

Zooming in: Time for a shopping spree.

Inditex’s stock flew up after the news, bringing the firm’s market value way above $100 billion. And with a cash pile of over $11 billion, Inditex has plenty to splash on future-fueling investments. The company’s already investing in tech to improve the in-store shopping experience (read: make folk buy more, faster), like self-scanning checkouts and new security systems that could whittle down long queues. Plus, the world’s biggest clothing retailer plans to open 30 more US stores – a lightly treaded market for Inditex – in the next two years.

The bigger picture: Euro-no.

Inditex isn’t alone, mind you: European stocks have held up pretty well this year compared to the rest of the world. But the prospect of a strengthening euro – a result of continued rate hikes in Europe while rates elsewhere start to level out – could spoil the fun. See, plenty of the region’s top firms make major money stateside, and converting that back into a stronger euro will dent their takings – and potentially their stocks too.