China Stimulus Hopes Vaporized as Slowdown Continues

There was stimulus hope in January when China announced one month of credit growth exceeded the 2008 stimulus package in nominal yuan and dollars. That hope was left standing on one leg after China reported February credit growth reverted to trend. The other leg was taken out overnight when China showed retail sales slumped along with industrial production in the first two months of the year and fixed asset investment growth decelerated from 2018. Only real estate investment growth improved, but it was accompanied by a year-on-year decline on sales.

Here's the relevant charts from the real estate report: 2019年1-2月份全国房地产开发投资和销售情况
This chart is good news for GDP uber alles, but bad news for quality growth from other sectors of the economy. When coupled with the other data released today, it paints a bleak picture of the Chinese economy.

Here is real estate sales, by area in yellow and yuan in blue. The comparisons were harder because of double-digit growth in 2018, but this is a substantial slowdown if it holds. Adding to the "good news is bad news" narrative, real estate investment might be signaling the dry tinder for a fire exists. Each stimulus has sparked a surge in real estate activity and home prices, and there's good reason for Chinese officials to worry this time isn't different. Aside from losing control of the sector, a reinflation of the housing bubble could seriously and perhaps permanently end the domestic and international public's belief in the omniscience of Chinese central planners.
Fixed asset investment growth ticked higher, but that was all due to real estate. A positive in the report was a spike in mining investment.

The main takeaway and perhaps the biggest blow to the stimulus hopes however, is the year-on-year FAI growth change from 7.9 percent to 6.1 percent. There is no stimulus visible. 2019年1-2月份全国固定资产投资(不含农户)增长6.1%
If fixed asset investment is bad for stimulus hopes, retail sales might be the kill shot. This isn't a terrible number given it is on trend, but the Spring Festival period is like Christmas for China. Retail sales showed no holiday impact. If anything, they could be masking a slowdown about to hit in the ensuing months. 2019年1-2月份社会消费品零售总额增长8.2%
Energy production was negative year-on-year. 2019年1-2月份能源生产情况

Finally, industrial production shows the manufacturing sector is still decelerating. 1-2月份规模以上工业增加值增长5.3%,剔除春节因素增长6.1%
Auto production yoy:
You will no doubt see reports touting the growth of electric cars, up 53.3 percent yoy. That is indeed good news if you are focused on that sector, but look at the raw numbers of autos produced:
And look at that line item right above autos: industrial robots. Another important indicator moving in the wrong direction.

1 comment:

  1. The Post-Chinese Era Begins