July Economic Data Catches Down to Credit Growth

See the prior post on July credit growth for more context. Also the prior posts China Crisis Repeating a Familiar Pattern For the Last Time as well as China Credit Growth and Risk of Financial Crisis, the latter goes into why I believe China is getting very close to a tipping point. The punchline: credit bubbles do not burst when there is a recession and growth turns negative. Credit bubbles burst when credit growth slows to a rate that cannot sustains ponzi or speculative finance. That "no high enough" growth rate tips a high-flying economy still experiencing what looks like rapid credit growth into a recession and financial crisis.

Trade deal are not causing a slowdown in credit. Maybe exacerbating the effects, but not causing. Trade deals will not solve what's ailing China's economy or the global economy.

Here's July industrial production.

Drilling down into the numbers, the usual suspects are still in contraction, but the year-on-year contraction in July is below the YTD contraction, i.e. it's possible a bottom has been hit. Where was the new weakness to print a sub-5 percent industrial production number? Power generation. The left highlighted column is the July yoy, the right is YTD.

Also notable are the drops in pig iron and steel, alternative energy vehicles crash with 9.1 percent growth in July versus 32 percent YTD.

NBS: 2019年7月份规模以上工业增加值增长4.8%

Retail sales report from NBS: 2019年7月份社会消费品零售总额增长7.6%

Sales ex-autos rose 8.8 percent. Cars and fuel were negative, as was gold and silver jewelry.

The economy has been reliant on real estate as the PBoC admitted this week. Real estate did indeed prop up the economy last month, slowing slightly, but still at very elevated growth levels.

NBS: 2019年1—7月份全国房地产开发投资和销售情况

For context, this growth rate was sub-10% for nearly all of 2015 and 2016, several months saw contraction and the overall growth rate even threatened to go negative. Here's the chart from January 2017. I leave it up to readers whether the current growth rate indicates a healthy economy or not. My read is the underlying economy is in far worse shape.

Finally, fixed asset investment. Not negative, but also not positive as it remains at a depressed level.

NBS: 2019年1—7月份全国固定资产投资（不含农户）增长5.7%