2nd Largest Economy In Deep Trouble
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— Retail Sales missed: Rising 2.5% vs expected 4.5%
— Industrial Production missed: Rising 3.7% vs expected 4.4%.
— Fixed Asset Investing missed: Rising 3.4% vs expected 3.8% Remember, when China reports numbers, economists assume they are far worse than those actually reported. So things are NOT good in China.
In addition
— China stopped reporting youth unemployment numbers which are estimated to be above 20%.
— China central bank cuts interest rates in surprise move from 2.65% to 2.50%.
Analysis
The post-covid spending spree in China has fallen flat. Unemployment remains high, unlike the tight labor market in the US. Government controls are keeping foreign investors out and businesses are diversifying supply chains to other countries to avoid further trade war repercussions.
For example, the biggest trading partner for the US is now Mexico.
With deflation, the Chinese gov’t will start printing heavily again. Being the second largest economy in the world, this is worth noting.
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