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Weekly Export Risk Outlook: China, France, Spain, Turkey



​China:  Turning point?                  

Business surveys suggest stabilisation; although still in contraction territory (below 50), the Caixin manufacturing PMI improved to 48.3 (from 47.2), with a rebound in new export orders, and the services index increased to 52 (50.5 in September). This positive news came as the government unveiled proposals for the next five-year plan (2016-20). The authorities expect a doubling in GDP per capita by 2020 (from 2010), with annual GDP growth of at least +6.5% over the next five years. Economic rebalancing will continue, with private consumption becoming the major growth driver as social welfare will be reinforced (including improved access to social insurance and to supplementary health insurance). The manufacturing sector will be upgraded, with a strong focus on innovation and high-tech and green industries, aided by tax incentives and green financing funds. In the financial sector, capital markets will be developed and expect further progress on RMB convertibility. The final detailed plan is likely to be unveiled in March next year.

Turkey:  Surprise return to single-party government

The AKP won elections last Sunday and regained the parliamentary majority it lost in the inconclusive poll in June. The AKP won an unexpected 49% of the vote, which gives it 317 seats out of a total of 550. The result came as a surprise as pre-election opinion polls predicted a similar result as in June, when the AKP got just 41%. Three other parties gained parliamentary seats (CHP 134, HDP 59 and MHP 40) so that the AKP fell short of the 330 seats needed to call a referendum on changing the constitution, which will make it more difficult for the AKP to turn Turkey into a presidential republic, although it is unlikely that President Erdogan will forgo this target altogether. Markets reacted positively to the outcome, which has reduced political uncertainty in the short term. The TRY gained 4% on Monday. In the longer term, it remains to be seen whether the AKP is able to regain its economic policymaking credibility, which has eroded gradually in recent years. Growth has been weak since 2012 as the economy is struggling against the backdrop of large external financing requirements, loss of investor confidence and concerns about the business environment.

Spain:  Solid growth in Q3

As expected, preliminary figures released by the INE suggest that the economy continues its recovery, although at a slower pace. GDP expanded by +0.8% q/q in Q3, after +1% q/q in Q2 and +0.9% q/q in Q1. The carry-over for 2015 is +3%. Detailed figures will be released towards the end of the month but short-term indicators suggest that domestic demand continued to drive activity. Retail sales continue to grow steadily, expanding by +4.3% y/y in September, supported by: (i) increased purchasing power as a result of low oil prices and negative inflation (-0.7% y/y in September); (ii) loose fiscal policy ahead of the general elections in December; (iii) improvements in the labour market, with a further decrease in unemployment (21.6% in September) and recovery in employment (+3.2% y/y in September). We expect private consumption will continue to grow in 2016 but at a slower pace as the positive effect of the fall in oil prices will reduce progressively and fiscal support will lessen. The recent deterioration in consumer confidence points in this direction.

France:  Rebound in Q3 GDP?

Household confidence pared back from its September high of 97 (the highest since October 2007). It shed -1 point overall, with a fall of -6pts in households envisioning major purchases (still above its long-term average) and renewed fears regarding unemployment (+15pts). The latter thus remains the main impediment to residential investment by households. Meanwhile, household consumption expenditures stagnated in September, despite a strong increase in purchases of durable goods (+1.4% m/m, +5.3% y/y), buoyed by car purchases (+2.3%). Even so, household consumption bounced back strongly in Q3 (+0.7%) after a disappointing Q2 (+0.1%). This translates into strong sales volumes in the retail sector; +0.3% m/m and +3.5% y/y. Consumption is likely to remain the main driver of