China – third time...unlucky? The population is starting to chafe against lockdowns, but isn't prepared for opening. The compromise path forward is rising covid cases signalling more eventual openness, but lockdowns continuing to be used to try to slow the spread of the virus. That's a very messy path for financial markets.
China - credit better than the headlines The monetary data aren't bullish, but are more constructive than the headlines suggest. That's because credit growth outside of government borrowing is rising. This keeps alive the possibility that China is through the worst, though such an interpretation is a stretch as long as M1 growth is weak.
China – is that it for deflation? In October, headline PPI fell back into deflation, and CPI inflation eased quite sharply too. But there are signs that China is nearer the end of this deflation shock than the beginning.
China - export growth stops YoY export growth fell to zero in October. More downside is ahead, though surging car shipments suggest autos might buck this trend. Import demand is also slowing. It should contract aggressively in the next 6M, though that looks pessimistic given commodity prices and imports in the PMI.
China – summary slides Some slides from a brief presentation I gave yesterday. It was in three parts: the deflation problem; the short-term outlook; and the Congress contradiction.
China – tentative signs of a floor There are signs that the economy is bottoming, in the form of property sales, excavator sales and, to a lesser extent, property starts. These though are tentative, and need to strengthen before concluding the economy is through the worst.
China - monetary indicators still mixed With September's monetary data suggesting a further fall in liquidity preference and M1 growth, it still doesn't look like the economy is poised for a turnaround. But it is starting to feel like the risks around the cycle are less to the downside than they have been for the last few months.
China – Beijing blinks Policymakers have blinked, announcing a raft of measures to support property. On their own, these aren't sufficient to have conviction that the economy will turn. But with improvement in the construction PMI, they do suggest that for the first time in a while, not all the cyclical risks are down.
China - a floor? The overall tone of today's PMIs suggests that China's cycle remains weak. However, the construction PMI rose again, and with the official headline manufacturing PMI and input prices creeping up, for the first time in a few months, there is some risk that the domestic industrial cycle is bottoming.
China - not a firm floor The headline data were a bit stronger in August, but the details remain weak. It doesn't feel that the government is yet doing enough to really turn the economy around.
China – taking stock Overseas, the idea of Peak China is gaining traction, which is quite at odds with the full-on confidence in the further rise of China expressed by leaders in Beijing. The contradiction does suggest a need for policy change, but at least for now, that shift seems like the risk rather than base case.
China - August credit data Monetary data in August remained weak, with little reason to suggest any upturn in the macro cycle.
China – August CPI/PPI Food prices pose something of an upside risk, but underlying price trends, particularly in PPI, continue to look more deflationary than inflationary.
China - August foreign trade Exports are now starting to slide. That's important given they've been the one bright spot for the economy in the last few months. Weakening external demand will mean China's cycle is even more challenged into 2023.
