Yuan Extends Losses After China Macro Data Disappoints

The world's brief infatuation with the idea of green shoots, or that a recession may be avoided, suffered a head on collision with reality after the latest dismal China data dump which was nothing short of a disaster for the econo-bulls.

In retrospect, it was all too clear, because just hours after China's premier Li warned that maintaining growth of 6% or more is "very difficult", Beijing decided to demonstrated in practice what the premier meant, and slam the currency in the process, because just after 10pm, China's yuan extended its early losses, testing down to the fix after the bulk of China's economic data for August disappointed across the board:

  • Industrial Production rose just 5.6% YTD YoY (below the +5.7% exp and down from +5.8% prior)
  • Retail Sales rose just 7.5% YoY (below the +7.9% exp and down from +7.6% prior)
  • Fixed Asset Investments rose just 5.5% YTD YoY (below the +5.7% exp and down from +5.7% prior)
  • Property Investment rose just 10.5% YTD YoY (down from +10.6% prior)

All of tonight's data missed expectations with only the unemployment rate improving very modestly (falling from 5.3% to 5.2%).

Source: Bloomberg

Which sent the yuan lower...

Source: Bloomberg

Is this good news - more stimulus; or bad news - stimulus isn't working and Trump is winning? Or does any of this backward looking data even matter when China just reported that its apparent oil demand jumped by 9.1% Y/Y, and with China the biggest Saudi oil customer now looking at a price shock, just how will China's economy absorb what looks like a consumer spending and confidence crushing surge in oil prices.

One thing that is certain: if indeed Iran is responsible for the attack on Saudi oil facilities, that fact that it will indirectly cripple China's economy at a time when the US-China trade war approaches its critical stage, would likely make Iran Trump's best friend... although we doubt that this particular verison of events will get much media exposure.