Economic Commentary: China's Recovery, U.S. Trade Deficit, Household Well-Being


  • Is China’s Recovery Losing Steam?
  • Record U.S. Trade Deficit
  • Many U.S. Households Are Not At All Well

FIFO ─ first in, first out ─ is a term used in accounting for inventories. But it can also be used to describe China’s experience with COVID-19. China was “first in” to contagion and mass shutdowns, and was the “first out,” recovering from pandemic-induced disruptions to economic activity. As other countries struggled to contain the virus, China was the only major economy to have expanded in 2020.

China is now also the first major economy to unwind its pandemic-related stimulus measures, and headline figures show the power of its progress. China’s real gross domestic product (GDP) grew at a staggering year-over-year rate of 18.3% in the first quarter, its biggest increase since reporting began in 1992. That said, it is unlikely that China’s economy can keep up such lofty momentum.

China’s economic rebound has been aided by debt-fueled state investments in industries, along with a surge in exports. As COVID-19 led to plant closures in several parts of the world, Beijing’s factories saw a higher volume of overseas orders for goods ranging from protective kits to electronics for working from home.

As manufacturing in the rest of the world comes back online, China’s export growth will lose some steam. Chinese manufacturing activity is already taking a modest hit due to disruptions in supply chains, reflected in the softer Purchasing Managers’ Index for April. Semiconductor shortages, along with rising input costs, are weighing on China’s electronics and auto industries.