J.P. Morgan: Transport activity in China has been disrupted by Covid-19
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The Covid-19 related restrictions in China could have both domestic and international consequences. Economic activity in China is likely to be dented by lockdowns. Shanghai is still implementing strict containment measures - impacting transport activity - while rising cases in Beijing could cause additional disruption.
With many developed markets reliant on imports from China and other parts of Asia, ongoing lockdowns will also prevent supply chain issues from easing and could keep goods inflation elevated. Goods inflation in developed markets is already high and this creates a headache for central banks.
Inflationary pressures appear unlikely to ease quickly but consumer confidence has fallen recently, suggesting there are already risks to the growth outlook. For now, the central banks will probably continue to tighten policy. However, as we enter the second half of the year, if the growth outlook does deteriorate then central banks may deliver fewer hikes than are currently priced in.