Global Reflation Trade In Trouble: Chinese Economic Data Plunges To 6-Month Lows As New Orders Dry Up

Tyler Durden's picture

New Orders for Manufacturing and Services sectors of the economy tumbled to their lowest levels in at least 6 months, weighing down both PMIs to their lowest levels since October 2016. After Q1's record surge in new credit creation, it appears the rapid tightening in China's financial conditions is already having an impact on the real economy (as well as the bond and stock market).

As a reminder, for the first quarter, TSF reached a new record high 6.93 trillion yuan - equivalent to the size of Mexico's economy - and well above last year's first quarter total. At today's Yuan exchange rate, China's credit creation in Q1 amounted to just over 1 trillion US dollars.

 

And since then PMIs have plunged from multi-year high to six-month lows... and it's broad-based...

 

The manufacturing data shows and sudden sharp drop in New Orders, output prices (commodity crash), and

 

But Services data is even worse - the 4th month of contraction in employment and a drop in doemstic and export new orders...

 

The global engine of reflation just hit a wall...

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whatswhat1@yahoo.com's picture

Never mind all of those boring charts.  Just keep watching the avatar...

christiangustafson's picture

Challenge accepted.

Hedgers, vote for a winner here, please.

Battle of the avatars!

. . . _ _ _ . . .'s picture

Sorry guys, I vote for alangreedspank.

Normally, I'd much rather look at sandy butts than floppy dicks, but his avatar is too amusing.

christiangustafson's picture

You are a crude but effective man, sir.

whatswhat1@yahoo.com's picture

You wouldn't be the first one to say that.

DingleBarryObummer's picture

Those avatars should be illegal. Tsk Tsk I wag my finger at you.  Yea, that's it, my "finger."

. . . _ _ _ . . .'s picture

"New Orders Dry Up"

Is this on a global scale?

Would those be New WORLD Orders?

2_legs_bahhhhhd's picture

Not to worry, next quarter it will rebound, there is a shitload of Chinese crap that is destined to grenade and will have to be replaced.

Engineerd crapsolescence

Midnight Hour's picture

Looks like their biggest Customer is not buying, that is North Korea. Wonder what upset them?

Arnold's picture

Christmas manufacturing slump.

Bangladesh numbers would be more interesting, given the amount of retail clothiers going tits up.

More credible, too.

Ban KKiller's picture

Change accounting practices to reflect needed  goals, simple.

DingleBarryObummer's picture

Fire up the printers!  We are going plaid ludicrous speed! 

Dilluminati's picture

I was reading that Russia cut it's interest rates twice now.  I'm not buying any argument of reflating anything.  Adding debt to a debt deflation crisis solves little.

DingleBarryObummer's picture

they've been "balancing" the pressure levels in this bubble for a while.  People have been saying it's going pop and all doom will break loose for years now.

Dilluminati's picture

In respect to a 401K where you have a 10 year horizon I'm going with:

When you consider the following 10 year CD Cussip DSH4O7384 DISCOVER BANK 2.750000 05/03/2027 05/03/2017 call protected FDIC insured.  And then look at the T-Bill rates, your getting the 20 T-Bill at 10 year CD.  

https://www.treasury.gov/resource-center/data-chart-center/interest-rate...

According to the latest 2014 release of Dalbar's Quantitative Analysis of Investor Behavior (QAIB), the average investor in a blend of equities and fixed-income mutual funds has garnered only a 2.6% net annualized rate of return for the 10-year time period ending Dec. 31, 2013. 

https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investor...

   A 2015 study of 3,500 401(k) plans by a Yale law professor found that a "substantial portion" of plans had badly designed investment options that offered employees high-fee funds. The study found that "the problem of excess fees is sufficiently severe that, in 16% of plans, young participants would do better to forgo the tax benefits of 401(k) savings" and instead invest on their own in an low-cost, outside retirement account. 

In other words: For some people, 401(k) fees are so egregious that they outweigh any benefit of using a retirement account instead of a standard investing account.

 

Yet many people have no idea their retirement savings are being pillaged. A 2013 study by research firm LIMRA found that half of 401(k) plan participants didn't know how much they paid in fees, while 22% mistakenly believed they paid no fees at all. 

http://www.businessinsider.com/how-to-lower-your-401k-fees-2017-4

Let us see who is correct over the next ten years?

I think that debt deflation, robotics, AI, global wage stress, and mal-investment, NPL's all lead to lower rates, QE, and Zirp.   Until I see stronger job data and raising wages I think that the fed will load another round in the bazooka and snatch it back by years end.  The next rate hike should make anything ARM, consumer debt, car debt, anything floating to the rate like student loans negate the minimal GDP by %, a 1/4 basis in rate hike = 1/4 % drop in GDP with getting the traction back that much more difficult within the real economy.  

This reflation trade was another sort of bank bailout and rotating the debt deflation upon the US consumer, the tax cuts again: that tactic.  As all of the disruptive technologies created wealth none of it trickled down, of all the wealth of the 1% again none trickled down.  So you should if possible lock in the no-fee, garunteed return, and conclude that the bank bailout offered small investors the same benefit but it was best represented in the 10-year CD.

Not hearing much about BRICS, they much more corrupt than the 1% who promise a better tomorrow and forgot to offer a wage increase, compensated education for new skills, and have instead cut 401K match and raised healthcare costs.

There is damn little left to steal, so I'll again share some sound advice here and say if you can self-direct then the cussip I gave is a good play.  You'll damn sure not see a financial advisor suggest it as they can't churn a fee from the deal.

God luck,

PS I actually did work for the IMF in financial publications, for real.  I don't work there now, however I'll tell you that more debt or tax cuts won't cure debt deflation in a global economy and though the elites give lip service to cooperation again they are greedy fucking pigs so mirror their trades, the best part about greedy people is they are predictable and you can understand them trasnparently.   This market may in fact go higher, but it sure as fuck won't for ten years.