Why The Collapsing Chinese Credit Impulse Is All That Matters

Back in June 2017, we wrote that if one had to follow just one macro indicator that impacts virtually every aspect of the global economy, that would be the Chinese credit impulse. Not surprisingly, the article was titled "Why The (Collapsing) Credit Impulse Is All That Matters".

Today, almost a year and a half later, the world is once again on the verge of a recession, with China - whose recent economic data has been on the verge of disaster - closely watched as the spark that could light the next global economic and financial conflagration. And not surprisingly, it is again all about the Chinese credit impulse, which - it should come as no surprise - has dropped to just shy of a fresh post-crisis low (note how it was China's record credit impulse burst in 2009 that dragged the world out of a global recession).

(Click on image to enlarge)

Which brings us to the latest Chinese data overnight, which as we discussed yesterday showed that activity has further disappointed with Industrial Production missing and consumption/retail sales slowing, a message consistent with what we heard yesterday from global central banks, as the global slowdown forced both the ECB and SNB to lower 2019 growth- and inflation- estimates, along with the Bundesbank today cutting the German growth projection as well (while the latest PMI data showed German private sector expansion dropped to a four year lows)—all corresponding with the Fed’s own “dovish pivot”.

So with attention focusing on China, Nomura's Ting Lu’s this morning reiterates his view on the sequencing of China's economic data, and expects the front-loading of exports to continue over the 90-day truce period, which will help support production in December however this benefit will be somewhat offset by weakening external demand, and thereafter into 1H19 (esp Q2), data will show significant slowdown, as the pull-forward around the tariff front-loading will fade in conjunction with the negative impacts of the cooling housing sector and the overall credit down-cycle.

1 2
View single page >> |

Disclosure: Copyright ©2009-2018 ZeroHedge.com/ABC Media, LTD; All Rights Reserved. Zero Hedge is intended for Mature Audiences. Familiarize yourself with our legal and use policies every time ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.