China – backward looking Inflation was soft in November, but with the exit from covid dramatically changing the short-term outlook for the economy, these price data are backward looking. Just how much core CPI can now rise will be indicated by inflation expectations and liquidity preference.
China – weaker again The PMIs suggest renewed weakening of the economy in November. That perhaps explains the accelerated pace of property easing. That loosening is an important development, but as long as China remains mired in covid difficulties, the outlook for the economy will remain very difficult.
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.
