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Massive Downward Revision Of China Leading Economic Index Refutes China "Recovery" Myth

Tyler Durden's picture




 

The debate of China's double dip may have just been sealed after the "Conference Board corrected its
April gauge for the outlook of China’s economy, saying its
leading index for the country rose the least since November,
rather than registering the biggest gain in 14 months
. The gauge compiled by the New York-based research group
rose 0.3 percent, less than the 1.7 percent gain reported on
June 15." Ignoring for a second the fact that such massive swings in amplitude imply either a malicious data misrepresentation intent or weapons grade stupidity, the second derivative in Chinese growth has now peaked, just at the time when the country for whatever optically political reason decided to unpeg its currency. We are now looking forward to the official rescinding of that decision, and a resumption of the peg. Of course, the fine gentlemen at the Conference Board, have come up with some trivial excuse, namely that the previous release contained a “calculation
error” for total floor space on which construction began, but it is now too late - the discrediting is beyond terminal. And anyone who believes this same agency for its monthly "consumer confidence" reading should ask themselves repeatedly if the CB did not, by mistake or just by following guidelines from above, drop the minus sign.

More on the damage control from Bloomberg, which is too little too late:

Stocks tumbled after the statement, which added to evidence that China’s acceleration in growth has past its peak after an 11.9 percent jump in gross domestic product in the first quarter from a year before. The Shanghai Composite Index slid 1.8 percent, the most since June 18.

“This correction doesn’t affect our outlook for the Chinese economy,” William Adams, resident economist for the Conference Board in Beijing, said in a telephone interview. “Growth was not likely to accelerate in China, and in fact, a moderation is possible. This correction also supports the same view.”

Adams said at the time of the original release that new construction work, the key factor pushing up the indicator in April, may not continue to grow so quickly.

Today’s revision showed that total floor space started in April dropped 0.1 percent, instead of the 1.3 percent gain originally reported. China’s regulators have tightened rules for the property market in an effort to stem speculation and avert an asset bubble in the aftermath of a record credit expansion last year.

h/t Rodrigo

 

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Tue, 06/29/2010 - 01:22 | 440696 Testicular Cancer
Testicular Cancer's picture

I sometimes wish this was China. We could put those CB bastards before the phaser sqad, waterboard them Chinese style, castrate them, or some other suitable "People's" punishment.

Tue, 06/29/2010 - 01:27 | 440702 vainamoinen
vainamoinen's picture

Checked out the BDI lately -

http://stockcharts.com/h-sc/ui?s=%24bdi

Uh Oh - - -

Tue, 06/29/2010 - 05:55 | 440857 papaswamp
papaswamp's picture

yea man crossed under 2010 lows trying to take on the oct 2009 low point...

Tue, 06/29/2010 - 01:28 | 440705 arnoldsimage
arnoldsimage's picture

is there any truth left in the world?

Tue, 06/29/2010 - 02:36 | 440759 VK
VK's picture

There is, just not from main stream sources. The truth lies on the fringe.

Tue, 06/29/2010 - 05:54 | 440855 Cognitive Dissonance
Cognitive Dissonance's picture

The second derivative of truth has reached it's peak and is rapidly falling.

Tue, 06/29/2010 - 07:16 | 440903 TuesdayBen
TuesdayBen's picture

is there any truth left in the world?

Isn't that the truth.

Tue, 06/29/2010 - 08:08 | 440959 Fazzie
Fazzie's picture

 Your trustworthiness is wearing thin. Its Tuesday and you owe 34,652 bucks on your hamburger tab!

Tue, 06/29/2010 - 08:34 | 441013 Cognitive Dissonance
Cognitive Dissonance's picture

Put it on Helicopter Ben's tab. He's good for it.

Tue, 06/29/2010 - 01:33 | 440712 TheWord
TheWord's picture

The Chinese economy relies on a flood of liquidity to keep growth at +8%.

Hot money inflows are slowing, government is tightening monetary policy and most local authorities are broke.

There's a reason the Shanghai stock indicies are down 70% from their peaks.

Tue, 06/29/2010 - 07:16 | 440904 chindit13
chindit13's picture

Under the heavy handed guidance of the CP authorities, Chinese banks lent out the equivalent of 40% of the nation's GDP since January 2009.  It took that much just to get the traditional 8.88% growth, complemented by the fact that no regional head has ever failed to "produce" less than his dictated growth target.  So they spent about $2 trillion to get $400 billion of growth.  Even Leo's solar power is more efficient.

Tue, 06/29/2010 - 01:34 | 440713 Al Huxley
Al Huxley's picture

US futures don't seem to care much for this news.  If they can't rally before morning tomorrow might be the day volume returns to the market.

Tue, 06/29/2010 - 02:09 | 440747 Temporalist
Temporalist's picture

Asian markets are getting hammered now.

I guess the G20 didn't ease anyone's mind.

Tue, 06/29/2010 - 05:25 | 440841 Sudden Debt
Sudden Debt's picture

It's like every bull got their throats cut and are boiled into a buffel soup.

 

Tue, 06/29/2010 - 01:38 | 440718 Hedge Jobs
Hedge Jobs's picture

how convenient, im sure they have been very busy getting all their buddies out of asian stocks for the past 2 weeks

Tue, 06/29/2010 - 08:15 | 440977 Fazzie
Fazzie's picture

 What? You mean the ol MSM investment rationale of "Hey the USA stocks are down but China is just getting started" was somehow flawed??

 Will they switch to "OK, so the US, China, and India markets might be down,  but South America is booming!"

Tue, 06/29/2010 - 01:57 | 440739 jdrose1985
jdrose1985's picture

How the fuck could anyone possibly trade this environment?????????????????????????????? You guys who are deserve my admiration now and pity down the road.

Tue, 06/29/2010 - 02:47 | 440767 Hedge Jobs
Hedge Jobs's picture

Im still trading JD, as long as i have clients in stocks ive got sell orders to write!

 

did anyone notice the CB's moto? "trusted insights for business worldwide"

 

 

Tue, 06/29/2010 - 08:23 | 440989 Fazzie
Fazzie's picture

 Business cant afford much more of those trusted insights.

 

   Are these clowns cut from the same cloth as the people who claim restricting bonuses would cause "talent" to flee the country?

 

  Next thing you know they are like "Oops!" "Calculation error!" Turns out Chinas leading the double dip!" 

 

   WTF? The talent forgot to carry the 2 or something?

Tue, 06/29/2010 - 06:15 | 440860 Cognitive Dissonance
Cognitive Dissonance's picture

Ditto. I have trading clients who are in the market without my advice that will want to move.

On the other hand, longer term trend trading rather than day trading has been successful for me for the past 8 years. The key is to be flexible and not make moves on a days or even weeks worth of market movements.

Ignore the highs and lows of the trend and slice yourself a piece of the soft underbelly of the middle of these big moves. Most of the crazy market moves are at the extremes.

Tue, 06/29/2010 - 08:08 | 440962 sumo
sumo's picture

I go long/short volatility but have been net long for months. Doing ok, but  you have to stay nimble at all times.

Just read Bill Cara's blog this morning. He thinks the FOMC will intervene via the usual suspects (GS, JPM, etc) if the market falls over.

As many here have said, there's nothing but an air pocket under S&P 1050. Stay nimble, stay nimble. No telling what the FOMC will do when cornered like a desperate rat.

http://caracommunity.com/content/bill-cara%E2%80%99s-blog-june-29-2010

 

Tue, 06/29/2010 - 02:06 | 440746 sushi
sushi's picture

Now that they have "unpegged" the yuan what is the bet that it will fall relative to the dollar, the euro, and every other currency?

Of course everyone will complain. But the Chinese will proudly point out "It floats!"

Tue, 06/29/2010 - 05:12 | 440836 TBT or not TBT
TBT or not TBT's picture

Which would prove they are witches!   How do I trade this?   I mean other than shorting our stock market and suchlike?

Tue, 06/29/2010 - 08:29 | 441004 Minyan Vince
Minyan Vince's picture

you nailed it sushi; and i think that's the point...something tells me that China unpegged because they fear the Dollar strengthening (which it will for a while) and taking the renminbi with it...so best to let it "float" down to save exporting power

Tue, 06/29/2010 - 02:35 | 440758 abalone
abalone's picture

Bye Bye AUD & commodities...hello USD

Tue, 06/29/2010 - 02:37 | 440762 dan22
dan22's picture

China Shark Loan Ponzi Scheme- Interest Rates Soar to 50%

An article that was published in a major Chinese news source stated that in the past few months, more and more China real estate developers are seeking emergency loans in order to support the local shark loan operators, since more and more real estate developers are experiencing cash flow problems due to low transaction volume in the real estate market.

This is how this ponzi scheme works:
Local governmental officials, that are demanded from the government to produce double digit GDP growth numbers give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurastiction. some of them are active partners in shark loan businesses. For example, a party secretary of legal affairs, that controls the public security bureau, which is a court and prosecutor division of government in yongkang city, in zhe jiang province tired to run abroad using a passport in 2009 after he found out he can’t repay 60million Yuan. In li Every scheme has a ring leader who's job is to collect money from all the participants in the ponzi scheme. When some of these ponzi schemes blow up, the party leaders always get bailed out first, and some even ask local business owners to lend them money, and then bail out their own personal fund. After that the ring leader turns himself in and gets protection from the local government.

Most of the funds that are collected in this classic ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.

Tue, 06/29/2010 - 03:16 | 440778 Advoc8tr
Advoc8tr's picture

Supposed to be reply to 440739 ..... not sure how I stuffed it up?

 

It's easy..... just short everthing - sell on the 'misplaced optimism' bounces and ride to the bottom.  When gov steps in with a couple of trillion close and go long until it wears off then go short again.  Occasionally cash out profits and buy physical gold / silver.  Repeat

Never traded in my life until I came accross Zerohedge... via Max and Stacey @ Keiser report. Got up to speed, opened a CFD trading account, 'invest' 10% of capital for speculation put rest in PM's and accumulate more PM's with profits. If you lose it all [speculation money] I get the feeling you won't notice it in the end when the 90% as PM's blossom.

Seems to be working well so far .....

 

Great Site!

 

 

Tue, 06/29/2010 - 08:25 | 440994 sumo
sumo's picture

On days like this, Zero Hedge is THE place to be.

Tue, 06/29/2010 - 03:12 | 440779 MrTrader
MrTrader's picture

The only calculation mistake is the brain of these Conference Board intelligence acrobats...

Tue, 06/29/2010 - 03:25 | 440789 carbonmutant
carbonmutant's picture

Well if they unload some of those T-bills they be OK.

Tue, 06/29/2010 - 03:26 | 440790 Alex Lionson
Alex Lionson's picture

Dear Tyler, btw can you comment on the recent drop of the Baltic Dry Index in the light of global economic "recovery"? 

Tue, 06/29/2010 - 08:50 | 441045 sumo
sumo's picture

My take: there is an inventory-driven bounce in the economy after each recession, and the BDI says the bounce is fading.

 

Tue, 06/29/2010 - 04:12 | 440812 Quantum Noise
Quantum Noise's picture

Hugh Hendry must be in some weird investor heaven where they all drive electric cars and drink scotch, not necessarily in that order.

Tue, 06/29/2010 - 04:28 | 440819 leftcoastfool
leftcoastfool's picture

Where's Leo when you need him?  I'm sure he could explain why these numbers are supportive of our "recovery" gaining even more traction...

Tue, 06/29/2010 - 06:17 | 440872 ColonelCooper
ColonelCooper's picture

"Make no mistake, the recovery is gaining traction." - Leo Kolivakis

Tue, 06/29/2010 - 07:42 | 440919 LongGold
LongGold's picture

DOW futures now below 10k (again). Yup,sure seems like it gaining traction alright...To the downside :-)

Tue, 06/29/2010 - 07:47 | 440928 monmick
monmick's picture

Sometimes, you need to take a step back to better jump forward?

Yeah, that's it...

Tue, 06/29/2010 - 04:40 | 440826 Oh regional Indian
Oh regional Indian's picture

What  a strange and un-expected source for "the shot heard around the world".

Sounds simple enough, some mistaken assumptions, just a tweak, all is well.

But for money, the clear signal is that the emperor has NO clothes.

China is Naked, the US is Naked, Russia is Naked. Britain is beyond naked. The EU just shed her clothes in a jiffy recently. India was naked long ago.

No fun being naked just as the biggest chill is about to set in.

 

Brrrrrrr.............

 

ORI

http://aadivaahan.wordpress.com

Tue, 06/29/2010 - 05:36 | 440850 Djirk
Djirk's picture

"in an effort to stem speculation and avert an asset bubble in the aftermath of a record credit expansion last year"

 

Wow big suprise, record credit expansion created and asset bubble....weren't they watching the US/EU train wreck?

 

OK guys, when the bubble starts to pop and the banks are all illiquid, create a lot of cash with a computer entry and inject it into the banks.....be sure not to force any write downs of asset vaules, because that would hamper trading profits.

Tue, 06/29/2010 - 06:46 | 440870 papaswamp
papaswamp's picture

whoa the euro just dove under 1.22. Wonder if that supposed Chinese cash support for greece will really materialize.....or this is a fake revision to get the yuan to depreciate.

In other news...the IBEX is getting pounded....the runs on banks might start today...I surprised they haven't actually.

 

Tue, 06/29/2010 - 06:46 | 440883 Mentaliusanything
Mentaliusanything's picture

Damn I got to pull my Dow 10000 cap off - Again! This shit is wearing out the brim.

I demand Stability, honesty and accurate reporting of all things Financial !

Otherwise just lie to me with a bedtime story. Like Leo does - you know "we are past recovery and into Expansion mode"

And the siren sounds like this Whoop Whoop Whoop at Broad street. Have a fun Tuesday.This cat's got no Bounce left in it


Tue, 06/29/2010 - 07:30 | 440915 yabs
yabs's picture

the chinese stock  market entered the death cross weeks ago

expect a crash soon

Tue, 06/29/2010 - 07:38 | 440922 vicelord
vicelord's picture

China slowing down is a big surprise... to who?

Tue, 06/29/2010 - 07:44 | 440925 chistletoe
chistletoe's picture

I am of course just a country bumpkin, livin in a town with nuthin but

hills, ho's and liquor stores.

When China first announced that they were depegging,

I pointed out their loss of exports to Europe

and posited the unlikely scenario that their real intention is to devalue their currency, along with everybody else.

I was politely made fun of.

I pose it again.

Tue, 06/29/2010 - 08:57 | 441065 sumo
sumo's picture

Don't know who ridiculed your guess and why, but your view has much support, given the big falls in the EUR; the size of China's exports to Europe; and China's stated intention of pegging to a basket of currencies.

China played Obama and Merkel like pianos at Copenhagen - "ratfucked" was the technical term used by the Australians. So it wouldn't surprise me that China is doing even more ratfucking via its currency.

Tue, 06/29/2010 - 07:57 | 440935 Zina
Zina's picture

Talking about BRIC's, I have "not so good" news from here (Brazil):

http://www.estadao.com.br/estadaodehoje/20100629/not_imp573479,0.php

"Economy shows signs of slowing in 2nd quarter"

In the first month of the 2nd quarter, April, a series of leading indicators show a sharp slowing in the pace of economic growth.

With the end of the massive tax stimulus we had here for almost a year, I was expecting for this...

Perhaps the sales of t-shirts of the Brazilian football team in June may partially reverse this picture...

Tue, 06/29/2010 - 07:58 | 440941 HEHEHE
HEHEHE's picture

Give them a break they had to translate the numbers from Chinese!

Tue, 06/29/2010 - 08:00 | 440946 yabs
yabs's picture

I loved the way everyone thought China was going to save us

It was built out of the biggest bubble ie western consumers mortagaging their

bubble inflatewd houses to buy tvs and plastic crap from China

now that bubbles burst but everyone expects china to carry on?

who will they export to , the martians?

Tue, 06/29/2010 - 08:53 | 440980 Anarchist
Anarchist's picture

China may have some daunting problems but one of them is not an indebted consumer and huge foreign held debt. Sure there are speculators who bought way too much stock and real estate, but they are not the majority of the population like in the US. The Chinese government also has huge amounts of foreign reserves they need to burn off. If you were ever in China it would remind you of Japan. The cost of goods for the average consumer is off the hook. Most consumer goods sell for at least 2X what they are worth. You can buy electronics off ebay directly from China and shipped to the US for a fraction of what the same product would cost in Beijing. The Japanese I used to work with would buy their electronics in NYC and bring them home. If the government would allow consumer prices to drop the internal demand in the country would rise. The other issue is the lack of pensions and the one child policy. People have to save all the money they will need in their retirement. They know there will be no one to support them in their old age. The US crows about the savings rate being 5%. In Asia the savings rate is over 40%.

I don't understand how people can miss the reason the Chinese have been filling their coffers with copper, wood, iron ore, oil ..etc. It was not to fuel some sudden increase in exports. It was to get commodities at low prices and get rid of a small amount of the excess dollar reserves. People don't realize the Chinese government buys the majority of consumables required by manufacturers. This is a weakness of western companies who must buy much lower quantities at higher prices. The Chinese like to buy when demand is weak and prices low. They know there will be future internal demand. It is the Chinese government negotiating resource procurement deals around the world. No western company can bring the same horsepower to the table. The wests scam of using the world bank and IMF to loot the resources of countries has become ineffective. The only ones lining up at the IMFs door have nothing to steal.

Tue, 06/29/2010 - 08:25 | 440995 Zina
Zina's picture

Now I understand why the Baltic Dry Index is at a 6-month low, and dived bellow the 2,500 mark!

 

Tue, 06/29/2010 - 08:32 | 441009 John McCloy
John McCloy's picture

 China is a massive massive bubble. China makes the U.S. look honest related to the fudged data they release.

Tue, 06/29/2010 - 08:50 | 441042 Anarchist
Anarchist's picture

Yep. Keep looking at China through the tiny peephole the US media allows you to see. Take a trip there and go around the country. It will blow your mind what they have accomplished. The Chinese have built more in 25 years than the US has built in 100. China's big problems are years down the road. The Wests big problems are here and only getting worse. The standard of living for 90% of the Wests populous is going down. The standard of living for a large chunk of China's populous is going up. The goal of the Chinese leadership is to keep increasing jobs. The goal of the western leadership is to stave off insurrection as the sheep realize their future ain't going to be bright.

Tue, 06/29/2010 - 08:52 | 441050 yabs
yabs's picture

anarchist

all well and good but the US was in Chinas position in the great depression and who suffered the most then?

Tue, 06/29/2010 - 09:11 | 441079 Anarchist
Anarchist's picture

Great depression??? Have you ever been to China? What about China's present state would make you think depression? The Chinese leadership have a tiger by the tail but heading into a depression in the near term is not one of the possible outcomes. A lot of stupid investors in China are going to get their clock cleaned, just like in the West, but the present trend for the country is still higher. People and the government will need to take a painfull haircut. China needs to set it's own consumers free as far as consumption. There needs to be structural changes so people save a little less and spend a little more. That would give them another 20 years before hitting another wall. There is no way to predict what the future will be but the Chinese have done an amazing job in the last 25 years. Far better than any of the wests leaders have. More people have been delivered from poverty faster than in the history of mankind. Too bad the Indian elite do not want the lower castes to come out of the gutters. If their was ever a society that needs a massive reform it is the Indian one. The Indian elite need to be punished for their indifference to the lower classes

Would you want to try and keep 1.3 billion Chinese people happy? 

Tue, 06/29/2010 - 09:13 | 441087 spartan117
spartan117's picture

Conference Board?  Based out of New York?  Hmmmm....

"Jackson, who previously worked at the U.S. Federal Reserve and U.K. Treasury, predicts Chinese economic growth will slow to an 8 percent pace by year-end."

Gee, does the US Treasury have a really, really big offering this week?

Tue, 06/29/2010 - 10:14 | 441207 yabs
yabs's picture

anarchist\

yes i have been to China and one word comes to mind

BUBBLE

when that baby bursts its going to make the great depression look like a picnic

Its not about what countries want ok

its about the credit system

the credit system has reached its mathematical limit and thus a great depression/correction

 

Sure maybe China will be great some day but on;ly after a global meltdown

which it looks like we have just entered part 2 of today

chinese stock market is down 5 percent

will ensue

Tue, 06/29/2010 - 12:05 | 441674 Grand Supercycle
Grand Supercycle's picture

 

As first suggested on June 23,  looks like the equity counter trend rally has ended.

http://stockmarket618.wordpress.com

http://www.zerohedge.com/forum/latest-market-outlook-1

Do NOT follow this link or you will be banned from the site!