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China's Economy Goes From Bad To Worse, In Charts
Prepare to once again hear the word "decoupling" a whole lot more.
The reason is that while the US economy is supposedly on an upward tear after the 3.5% Q3 GDP print (thanks to the war against ISIS sending defense spending soaring and a very contradictory plunge in imports which suggest US tollers are seeing far less end-demand) and despite the immediate cut to Goldman's Q4 GDP estimate from 3.0% to 2.2% after US consumer spending tumbled in September it is, for now at least - because GDP-crushing snow is just around the corner - doing better than Europe (where Germany just joined the ranks of Spain, Italy and Portgual in the deflation column), Japan, where the BOJ just crashed recovery hopes and unleashed more QE for the official reason that the economy is tanking once more due to the inability to keep inflation steady above 1%, and certainly China, whose economy - driven by the housing market slide now in its 5th month and which has sent Y/Y prices negative for the first time since 2012 - keeps contracting, as confirmed overnight by the latest official PMI data from the National Bureau of Statistics.
The Chinese data in a nutshell: overnight the official NBS PMI report indicted the October manufacturing PMI printed at a disappointing 50.8, below the 51.1 in September, and well below the consensus hopes for a rebound and uptick at 51.2.
In fact, as the Chart below shows, this was the weakest October for Chinese manufacturing since 2008.
The October data was also the weakest since April's 50.4, when the PBOC launched a concentrated credit stimulus which succeeded in briefly boosting the economy, and whose effect has, however, now almost completely faded.
Goldman's take:
Among major sub-indexes of the official PMI, most key sub-indexes showed signs of cyclical slowdown from the previous month. We view production and new orders indexes as most important as they are most closely correlated with hard economic data. Both clearly softened (Production decreased to 53.1 from 53.6, and new orders moderated to 51.6 from 52.2). The only two sub-indexes that didn't decline were employment and supplier's delivery time (Employment increased 0.2pp to 48.4 and supplier's delivery time held up). This pattern is very similar to the pattern of the HSBC PMI (though the magnitude of fall in export orders index in the official PMI is much smaller).
We believe this reflects weak demand growth in the economy despite government's loosening efforts. Export probably has not been making as much contribution to demand growth as one might expect from the very strong export data either. Production and construction restrictions aimed at reducing pollution in and around Beijing during the APEC summit suggest downside risk to November activity and our 4Q GDP forecast of 7.3% yoy (around 8.4% qoq ann, SA).
And Bloomberg's:
A pullback in manufacturing will test the government’s determination to refrain from broad stimulus. The economy expanded 7.3 percent in the third quarter from a year earlier, the weakest pace in more than five years.
“The biggest drivers of growth such as fixed-asset investment are still slowing,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd., said by phone from Hong Kong yesterday. “Heavy industries like steel and coal are contracting on lower prices, and the negative impact of the weak property market is becoming more pronounced.”
A property downturn dragged the economy to its lowest growth in five years last quarter. China will “stabilize” property-related consumption and make it easier for people to access mandatory housing savings, according to a government statement citing a State Council meeting chaired by Premier Li Keqiang. This came after the central bank on Sept. 30 relaxed mortgage rules for homebuyers who have paid off existing loans.
And, of course, Zerohedge. From a month ago:
China's economy has ground to the biggest crawl it has experienced since the Lehman crash. What's worse, and what we predicted would happen when we observed the collapse in Chinese commodity prices ten days ago, capex, i.e. fixed investment, grew at the slowest pace in the 21st century: the number of 16.5% was the lowest since 2001, and suggests that the commodity deflation problem is only going to get worse from here.
As JPM summarized earlier today, pretty much every economic data release was a disaster, missing consensus significantly, and suggesting GDP is now trending at an unprecedented sub-7%.
So instead of beating an already dead horse, we will let the charts (of what is almost surely "optimistically-goalseeked" government data to begin with) do the talking.
- Output growth of non-ferrous metals, steel and cement slowed to 8.2%,
1.7% and - 2.2% yoy respectively in September from 9.5%, 2.4% and 3.0% in August.
- Headline year-to-date FAI growth slowed to 16.1% yoy in September from 16.5% yoy in August, below the consensus of 16.3%. Real ytd FAI growth also moderated to 15.3% yoy in September from 15.8% yoy in August.
- Investment growth of local projects (88% of total FAI) edged down to 13.3% yoy in September from 13.4% yoy in August.
- Real estate ytd FAI growth moderated to 12.5% in September from 13.2% in August as home new starts remain weak.
- Retail sales growth eased to 11.6% yoy in September from 11.9% in August, but quickened in real terms due to falling CPI inflation.
- Growth of total auto sales and passenger car sales in volume decreased to 2.5% and 6.4% yoy in September from 4.0% and 8.5%, respectively in August.
- China’s CPI and PPI inflation declined to 1.6% and -1.8% in September yoy from 2.0% and -1.2% in August, below consensus forecasts. Falling inflation in China was due to slower economic growth, the anti-corruption campaign which damped consumption demand, and the decline in global oil and gas prices.
- Food inflation softened to 2.3% yoy in September from 3.0% in August, while nonfood inflation decreased to 1.3% from 1.5%.
- The yoy growth of outstanding bank loans edged down to 13.2% from 13.3% in August, meanwhile that of outstanding TSF decreased to 15.6% from 16.1% in August.
- In volume terms, growth of iron ore imports picked up to 13.6% yoy in September from 8.5% in August due perhaps to falling prices, while that of copper and crude oil imports declined to -14.8% and 7.4% yoy, respectively in September from -13.3% and 17.5% in August
- In yoy terms, the number of cities that saw new home prices down/flat/up changed to 58/2/10 in September, compared to 19/3/48 in August.
- On the demand side, the yoy growth of new home sales in floor space terms and value terms picked up to -12.1% and -10.3% yoy in September from -13.4% and -13.7%, respectively, in August. However, in ytd terms, home sales growth in both value and volume terms moderated slightly in 9M14 from 8M14.
* * *
And so, with Europe, Japan and, now, China slowly sinking into what can be described a global period of economic slowdown, the only hope is that the US will decouple from... well... everyone, as slowly but surely seems to be happening:
Which is great, however if and when the USD-carry trade revulsion finally sets in and sends the dollar truly soaring (more on that in a subsequent article), it is not the US which will have the last laugh.
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Please don't tell me this means fewer smooth skinned damsels in US colleges.
I am sure the numbers are exaggerated to the upside. The real numbers are much worst!
Sum ting wong.
Why dont they just make up their charts like the USA does?
AE 9/11 Truth researchers plan lawsuit to seek release of 500,000 documents held by FEMA, NIST
http://wtfrly.com/2014/11/01/ae-911-truth-researchers-plan-lawsuit-seek-...
I'm giving her all the QE I got captain!
When the Chinese RE bubble pops, there's not enough ink in China to stop it.
The Chinese RE bubble is owned by Wall Street and Jewish bankers hoping for greater fools to buy up the property they have blown up to bubble valuations. actually the popping of the bubble will harm US banks far worse than the Chinese.
In fact you should pray for the bubble to pop so a few more Goldman bankers will have to commit suicide.
Just like all the major banks involved in the rehypothecating commodity finance vehicle frauds turned out to be non-Chinese banks...
Few understand the flow of capitial around the world and are able to trace those capital flows to their roots, especially when it's through shadow channels
.....Goldman bankers will have to commit suicide.?.....Now that is doing God's work!
Wow, the Chinese government lies less than the USA government.
They at least admit something, not like "good recovery"
Wow, you're surprised by that?
"Wow, the Chinese government lies less than the USA government. "
Best laugh I've had all day...
"Wow, the Chinese government lies less than the USA government."
The DC US is lying for two -- Them and Greater Israel.
An American, not US subject.
Europe is in way worse shape.
Normally, I should have had a tax return of over 17000 euro's this year and normally this happens before oktober. So I called arround where my money is and well... Not this year, it will be june next year.... ?!??
And after talking to friends, it seems that everybody who needs to get a return has gotten the same info.
All so they can say the deficit is almost in balance...
On average, the industrial production in Western europe is down 23% since july! That's massive!
On average, the industrial production in Western europe is down 23% since july! That's massive!
Where did you get that info? That seems to be depression numbers.
I live in central France which is a corridor for Military jets to practice.
The best leading indicator of the economy "flying hours".
This summer we were lucky to see a jet once a fortnight, compared to the previous summer nearly every day. (Multiple times).
Just in the last three weeks activity has risen slightly, but still only a fraction of what it was.
My guess -23% is probably a bit light on!
Ummmm..........What country are you in? What's that smell?
You terrorist! How can you claim 17,000 Euros in tax refunds! That is deeply unpatriotic and you shall wait in line like every Juncker or Hollande.
By the way, JUNE WILL NEVER COME
If what you're saying is true, I'm sorry to say you are fucked. You won't get this money back unless it's been diluted 1000x over.
Reset will happen before. That 17,000 Euros may buy your kid an ice cream then.
EU, eurozone along with the money debt system is sweeping all. The Global Debt went from 100 to 158 trillions just this year. All politician puppets cling in hammered GDP's and "growths", but the debt public and private is raising and will smack nations with the so called "sovereign debt".
Here's a thought to ponder:
When the world ponzie-economy finally collapses, China will have a massive manufacturing base as a foundation to rebuild upon. The American country will be left with nothing more than a massive corporate agriculture base.
Ponder that and wonder who is headed back to the Stone Age, or at least the Middle Ages, and who is not.
An American, not US subject.
"Impoverishing the American country by bombing a 3rd world village with a multimillion dollar missile, makes one wonder who is actually headed to the Stone Age."
When the system goes berserk no level of guns, gold and foodstuffs will protect you.
Probably the best bet will be a small fortified town and a united citizenry.
The debate continues as to how stable china really is. A big reason dropping house prices in China is so important is that is where almost 75% of household wealth is stored. Here in America a much larger share of household wealth, approximately 71% is stored in financial instruments. The end of the housing bubble in China has the potential to become a huge deflationary "house of cards."
The country is already suffering from massive overcapacity. Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need.
For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.
http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html
*Times posted are GMT-5
Japan has succeeded in opening a full on currency "war front" with China and the rest of Asia with their idiotic monetary expansion plans on Friday.
* 21:00 CNY Non-Manufacturing PMI (Oct) 54.0
* 21:45 CNY HSBC Manufacturing PMI (Oct) 50.4
These figures are going to be released tomorrow.
The manufacturing PMI missed last night.
CNY Manufacturing PMI (Oct) 50.8 51.2 51.1
Next week is going to be ugly.
China did massively overbuild, but many Chinese still live in Communist era shitholes. I drove through a ghost city and it was eerie. The owner of the factory I visited said one complex full of people looked like that three years ago.
The problem with RE valuations in China is that wealthy foreigners made massive speculative plays on the properties. The Chinese have been smart enough to stay away from the properties investment bankers have been buying. Letting them pass the properties back and forth. Eventually they believe the investors will become desperate and sell off the property at lower prices.
Declining RE prices is seen as a huge positive. The disconnect between asking prices and what people are willing to pay will be corrected. The Chinese play capitalism better than we do. The QC manager who drove me around lives in a house that has been valued at $5 million by investors. He won't sell it to an investor because he knows the valuation is bullshit. He paid about $500k for the house ten years ago. He did say he would sell it to a Chinese citizen for $600k because that is what he believes it is worth.
Luxury 4 bedroom villas in Guangzhou China rent for 20k RMB per month, or about $3000 a month. A lot of cash but those villas blow away the homes outside Boston that rent for the same. A more typical 200sq meter luxury apartment rents for $1700. What you would call a normal citizens apartment is 120sq meters and rents for about $800. Outside the city centers rents are far more reasonable.
Factory workers at one plant I visited are paid 7500 RMB per month. If they live in the dorm they live and eat for free. They have A/C, TV, and nice bathrooms. The dorm was on par with most US universities.
Another fact is everything Apple says about their sales in China is pure bullshit. The numbers represent channel stuffed inventory, not real sales. For every iPhone I saw ten Android phones. One of the most popular phone lines was actually the Nokia Windows Phones. The iPhone peaked with the iPhone4 in China. The 5 has been a flop and there is no interest in the 6. Xiaomi is decimating Apple and Samsung this year.
Also GM is lying more about their sales in China more than they are in the US. I visited 5 major metropolitan areas in China and barely saw a GM car. I saw more people driving Trumpchi than Buick.
The financial media lies about everything. They claim the US economy is booming, but on the ground all I see is decline and decimation. They claim China is contracting, but I didn't see it anywhere and the people I talked to were all extremely optimistic.
Here in the interior a normal citizen's apartment is either a 10sq m room with a bare bulb for those who don't have a new one in a new tower block building, or 85-115 sq metres for those that have the money for a new building. Many, and this is easy to see just wait for the sun to go down and look into their windows, don't have the money to decorate the unit and live in a bare bones concrete wall or just barely painted bare bones unit with the most minimal of fixtures.
Land is cheaper to get access to here, and many have courtyard style houses with a yard that is either tiled over or hard packed earth. Many of these older houses, and they are attached houses not a condo, are 150 to 350 square metres. The larger ones are 2 or 3 floors tall. In a Tier 5/6 village one can build for Y500sq metre. In the nearby Tier 4 small city buying a tower block apt unit is 1800-3500Yuan per sq m.
Add another 30% or so to build it out, pay for all of the permits, fees, taxes and developer cash grabs.
You have to be a contractor or have knowledge, because the guys doing the work certainly don't - but that is another topic.
OMG! The dollar is going to "soar"? A month ago, this site said hyperinflation was inevitable and imminent in the US. Does anybody know anything around here?
nobody knows, we are all guessing in the dark, that's what makes it fun
the conventional wisdom is that a 'soaring' dollar will bring about inflation, though IMO it's more likely to be inflation in assets and equities(debt and credit based items), consumer goods priced by international trade will likely face deflationary or disinflationary pressure(coz they are imported)
Ah, but this is all good news for the US to "full steam ahead"
capital flow out of Euro area is steadily increasing, official capital flow into China is slowly decreasing(though shadow channels remain large)
there's a good chance US will become the 'shining beacon' of the world in 2015-2016, and US Q3 and Q4 expectations are looking (relatively) strong indeed
if the 'jetstream of international capital flow™' reverses course (since much of the international 'hot money' are QE money) back to the US it will either be totally awesome(for stawks), or a total bitch(for financial stability)
need to place our bets for 2015 soon...
"Child Poverty Jumps 2.6 Million Since 2008, While Number Of Billionaires Doubles" How about an article on child poverty in China and the increase of billionaires? Thought not. No data. So what is this all about? No political agenda and damn the poor where ever they reside. I dare you to compare the West's poor with China's.
And China is supposed to be the economic powerhouse to take the lead in the global economy? Yeah, right!