There is no bottom in sight yet for China. Despite five interest rate cuts and traditional interpretations of monetary “stimulus”, the economy continues to decelerate beyond mainline understanding. Industrial production was just 6.1% in August, marking the thirteenth consecutive month (counting January, which is combined with February due to China’s New Year) below 8%, while retail sales rose 10.8%. Fixed Asset Investment, perhaps the key economic figure for China as it includes the real estate bubble, was the lowest growth rate since December 2000.
Growing evidence that the world’s economic powerhouse is slowing down has caused major investment market falls.
Other indications that the economy is weakening can be seen in falling car sales and lower imports and inflation.
Chinese manufacturers cut prices at their fastest pace in six years, largely on the back of a drop in commodity prices, which have dropped sharply over the past year as demand from China faltered.
Earlier this month, The National Bureau of Statistics reported a PPI of -5.9%. That is nearly as bad as the worst months during the Great Recession and already appreciably worse than the whole of the dot-com recession (which was likewise global). In fact, as noted last month, China’s producer price “deflation” lines up a little too closely with global recessions. In that respect, even the grudging acknowledgement in the mainstream of what all this means understates the nature of both its severity and, worst of all, how this continues to linger month after month.
“The economy is showing no sign of recovery,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “From the perspective of monetary policy, the government has done what it can, but demand from the real economy needs to pick up to really make use of that.”
“Demand for industrial products from domestic and overseas markets is still on the weak side,” Jiang Yuan, senior statistician at NBS, wrote in a statement issued with the report. “Downward pressure on industries is still relatively big.”
While the first part, “no sign of recovery”, is “unexpected” for orthodox economists it is the second, “weak side” “from domestic and overseas markets” that make this truly dangerous. In other words, there isn’t just a regional or specific nationality within a “transitory” slump but rather a global, unified deceleration that looks suspiciously recessionary except for its distinct lack of foreseeable rebound. As viewed from Brazil, the global economy continues grind slower and slower beyond the bounds of what used to be considered plain awful.