China Factory Output Weakest In 17 Years, Everything Missed

With currency turmoil and social unrest, China's economic assault tonight was supposed be the great equalizer - confirming that a few trillion here or there and everything looks awesome and happy, and not a tiny bit angry (and that the Americans are not to blame for everything).

Ahead of today's data, broadly speaking, macro data globally has been weak, but in China, recent credit growth numbers slumped and steel production slowed, suggesting graver concerns. And so here it is...

  • China Industrial Production BIG MISS +4.8% (+6.0% exp, +6.3% prior)

  • China Retail Sales BIG MISS +7.6% (+8.6% exp, +9.8% prior)

  • China Fixed Asset Investment MISS +5.7% (+5.8% exp, +5.8% prior)

  • China Property Investment MISS +10.6% (+10.9% prior)

  • China Surveyed Jobless Rate MISS +5.3% (+6.0% exp, +6.3% prior)

Now all that is left is to figure out if bad news is good news, or not...

Source: Bloomberg

It might seem that President Trump is 'winning' this race for now.

Some notables include:

  • Car sales weighed on retail

  • Jobless rise is significant

  • And Factory Output slowed to its weakest since 2002.

Source: Bloomberg

The struggling autos sector seems to be the main brake on the Chinese economy:

  • Auto manufacturing (by industry) down 4.4% y/y

  • Motor vehicles (by product) down 11.5% y/y

  • and for retail, car sales dropped 2.6% y/y

(The principle of "housing is for living in, not for speculation" was mentioned at the politburo meeting again last month.)

Finally, for a few minutes/seconds the world spiked after China set the yuan fix slightly stronger; we are not so impressed, nor is the yuan or US equity futures...

And stocks and bond yields tumbling...

Source: Bloomberg

So with inflation spiking, currency crashing, social-unrest; will the PBOC flood the nation with cash to ensure happiness at October's CCP Anniversary?

It's just that the sugar high from the injection is getting shorter...

Source: Bloomberg

Chen Yuan, former deputy governor of PBOC warned that “the trade war is evolving into a financial war and a currency war.”

And the yuan is getting weaker since this data...

Source: Bloomberg

Zhaopeng Xing, markets economist at ANZ Bank China:

"The pretty weak data will offset the risk-on sentiment from tariff delays. Data today also show the PBOC needs to ease, such as through targeted RRR cuts or a policy rate cut. With the yuan exchange rate stable at around the 7 per dollar level, the window for easing is open."

As goes China, so goes the world.