A month ago we warned "Beijing, you have a big problem," and showed 10 charts to expose the reality hiding behind a stock market rally up over 100% in the last year. Tonight we get confirmation that all is not well - China GDP fell to 7.0% (its lowest in 6 years) with QoQ GDP missing expectations at +1.3% (vs 1.4%). Then retail sales rose 10.2% YoY - the slowest pace in 9 years (missing expectations of 10.9%). Fixed Asset Investment rose 13.5% - the lowest since Dec 2000 (missing expectations). And finally Industrial Production massively disappointed, rising only 5.6% YoY (weakest since Dec 2008). Finally, as a gentle reminder to the PBOC-front-runners, a month ago Beijing said there was no such thing as China QE (and no, the weather is not to blame.. but the smog?).
China YoY GDP "nails the number" magically; but under the surface is a disaster...
Because, as we know, GDP in China is whatever the Beijing politicians say it is (very much like in the US), so we dig deeper.
First, Consumer Sentiment:
Perhaps driven by, or resulting in, a collapse in retail sales: The lowest growth in 9 years
... as well as stagnant and declining auto sales (watch out GM).
But it's not just the consumer though. The very heart of China's capital intensive economy - fixed asset investment - is now in V-Fib. The weakest FAI YoY since Dec 2000!!
The chart above explains why demand for global commodities will continue to decline for the foreseeable future. The chart below, on the other hand, confirms Yin Weimin worries about a labor slow down: with Industrial Production slowing, there will be far less end-demand for manufacturing production and labor. At 5.6% YTD YoY growth - this is the worst since Dec 2008!!
And all this leading us to the most important chart of all: home prices in China, which are crashing...
... at a pace faster than in what happened to US housing in the immediate aftermath of the Lehman collapse!
And the reason why this is such a problem for China is that unlike the US where the bulk of household wealth is in financial assets (i.e., the market), in China it is the reverse: nearly three quarters of all household assets are in real estate: real estate which is deflating, if not crashing, at an unprecedented pace.
Finally, here is a chart which leaves even us speechless. If indeed Chinese rail freight is indicative of underlying economic trends, then the hard landing is already here.
And finally a gentle reminder from just 4 weeks ago:
- CHINA MOF OFFICIAL SAYS NO SUCH THING AS CHINA QE: SEC. JOURNAL
But we are sure this data is just bad enough to spark another surge in front-running Chinese stock investor money.
- *HANG SENG CHINA ENTERPRISES INDEX EXTENDS GAINS TO 1%
China and Hong Kong stocks love this abysmal data!!