Directory
- 2020
- June
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- September
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- December
- 2021
- January
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
- February
- Long Term Employment Shifts Caused by the Pandemic
- Earnings Provide Positive Surprise Despite Pandemic
- Renewable Energy Under Fire in Texas
- Yellen Aims for Full Employment
- Minimum Wage Research in the Spotlight as a Hike Looks Inevitable
- Non-Residential Construction Soft in the Pandemic Economy
- March
- Views on Interest Rates and the Move in Treasury Yields
- Inflation Indicators Healthy but Still on the Rise
- Risky Assets Sell-off Despite Optimistic Economic Outlook
- The Latest on Vaccinations and What it Means for Growth
- April
- May
- Highlights of the Fed's "Economic Well-Being of U.S. Households in 2020" Report
- Relative Factors and Forward Change in Federal Funds Rate
- Can Wage Growth Keep Up With Inflation?
- June
- July
- August
- With That, We Carry On
- Supply Pressures Looking to Peak
- Cars are Still Expensive, Workers are Still Needed
- Recovery Continues, but Delta Looms
- September
- Fed Eyes Tapering While China Sees a Setback
- Review the Fed Previews
- No Tapering Yet
- Labor Day on Labor Day
- October
- Delayed or Disappearing Growth?
- Supply and Demand Mismatch will be Evident during the Holiday Shopping Season
- Workers Find Leverage in a Tight Labor Market
- Cautiously Optimistic
- Sour Expectations Take Down the Market
- November
- Q3 Earnings Were Surprisingly Good
- Inflation Weights on Bonds and Consumer Sentiment
- FOMC Tapers While Trade and Employment Flash Mixed Signals
- December
- 2022
- January
- Inflation is Getting Broader, Not Cooler
- Unemployment Insurance During the Pandemic
- A Year of Normalization
- What Will GDP Growth Look Like in 2022?
- February
- March
- April
- May
- June
- August
- Student Loans Targeted by the Biden Administration
- The Chicago Fed Index Reverses in July
- Chinese Economic Data Faltered in July
- Stellar Jobs Report Bucks Recession Fears
- September
- Bank of Japan Punished for Dovish Policy Stance
- Expect 75 Today
- Manufacturing Weakness in Germany has Implications for Euro Area Growth
- October
- 2023
- February
- April
- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- May
Chinese Economic Data Faltered in July
Jacob Hess
August 15, 2022
- China
- Economy
China was weak in July after a strong June. The PBoC confirmed this when it chose to cut some of its rates further in the same day as the release of the economic data (the first cut since January). Weakness that was initiated by the COVID outbreak and restrictions that followed seems to be hard to shake off with credit flowing less freely (fixed asset investment) and consumer activity (retail sales) struggling to continue the rebound.
The real estate sector has been a huge source of the uncertainty in the economy ever since the Evergrande situation. The crackdown on overleveraged firms has created tighter financial conditions in the real estate development business as well as more prudent borrowers. The trend in home prices speaks for itself. Just about every developed nation is seeing double-digit annual growth in housing prices while new home prices were up just 3.1% YoY in July.
As mentioned before, weakness was broad based in July. Retail sales are still struggling despite consumer activity perking up following its decimation in Q1. Sales grew just 0.3% MoM and were up just 2.7% YoY which is a lower annual growth rate than June at 3.1% YoY.
Industrial production suffered as a result of the disruption in the real estate sector. Firms in the building materials and furniture industries have limited production in the last year. Headline industrial production slowed to 3.8% YoY annual growth vs 3.9% YoY annual growth in June. ING points out that semiconductor production is down as well, likely a result of chipmakers expecting demand to slow in the near future.
Chinese Growth Will Be Missed
The data is clear. Chinese growth will be a sore spot in 2022 unless a dramatic turn around occurs in the next 5 months. Downgrades of 2022 GDP growth are cropping up across many financial institutions that have digested new Chinese economic data.
Recently, ING and ABN AMRO have lowered growth forecasts. The Dutch bank revised its forecast for China’s 2022 GDP growth to 4.0% from 4.4% as a direct result of the data and the rate cuts on August 15th. It also suggests that further downgrades could be on deck if trade data is sour. ABN AMRO confirmed the downward revision it made last month as a result of the array of releases. It now sees growth of just 3.7% in 2022, down from 4.2% previously.
Both adjustments follow the pessimistic view on China posited by the IMF in its World Economic Outlook update in July. The report said, “in China, further lockdowns and the deepening real estate crisis have led growth to be revised down by -1.1 ppts, with major global spillovers.” The IMF now forecasts an even lower 3.3% GDP growth rate in 2022, lower than the 4.6% estimated for the Emerging and Developing Asia region.
China is an integral part of global supply chains and a key piece of the global GDP picture. Weakness in its economy will not only affect its region but every continent. Investors should keep a close eye on how the recovery develops in the latter half of 2022 as Beijing grapples with the lingering effects of the pandemic. In the end most will agree, Chinese growth will be missed.
© MTS Insights 2022