Chinese Stimulus Talk Hints at Weakness, US Leading Indicators Sink to 10yr Low

Chinese economic data and U.S. leading indicators point to a protracted slowdown in 2019.

Over the past few days the headlines here are:

Home Prices Won't Rise: Jawboning or Hammering Home Credit Policy?
Tax Cuts, Slowdown Collapse Tax, Land Revenues
Updated WTF Wednesday: Chinese Industrial Production

Now this at ZH: China Prepares New Stimulus: Will Subsidize Car, Appliance Purhcases

Earlier today we presented three reasons to doubt the veracity of China's unabashedly strong Q1 economic data: the collapse in land sales, weak imports, and the unexpected decline in electricity consumption. We can now add one more: according to Bloomberg, China is now preparing to take even more stimulus steps to boost growth.

According to the report, Chinese officials are drafting measures to bolster sales of objects which have seen a surprising decline in consumer demand, namely cars and electronics. Notably, the report coincided with the latest GDP data showing a stronger than expected 6.4% expansion in the first quarter. Yet that appears to be insufficient for Beijing - which remains stuck in a protracted trade war with the US - and Chinese leaders are "stepping up attempts to bolster consumption and mitigate the threats posed by trade tensions with the U.S."

As Bloomberg reports, "the proposals include subsidies for new-energy vehicles, smartphones and home appliances, and are at a consultation stage with other government branches, with no guarantee that they’ll be approved."

As I showed in the post on industrial production, smartphones, autos and industrial robot production remain in contraction. Cement soared along with residential real estate investment (up 17.3 percent) in March. Look at the numbers behind the headline: area under construction is down and land sales are down. The increase in activity is concentrated in high-value residential projects.

In summary, the government is worried about growth, the PBOC is worried about money supply and someone feels the daily need to reiterate that homes are for living in, not speculating on.

Meanwhile the U.S. stock market heads to new highs on the assumption of higher growth, but leading indicators point lower. Even if it doesn't signal recession, the drop in leading indicators is on par with the Asian Crisis in the mid-90s and worse than the 2015/2016 slowdown. AIER’s Leading Indicators index falls to the lowest level since the recession