China's economy has been through a period of structural slowing, which up until early this year was accentuated by cyclical slowing. A series of stimulus efforts have helped improve the cyclical situation and push against some of the structural headwinds. This has resulted in a period of economic stability for China. The data released over the past week for August confirm this narrative, and the charts below illustrate some of the key trends and areas to watch for China's macro-economy.
1. The OECD Composite Leading Economic Indicator for China has undergone a clear turnaround from the worst level since the 08-09 global financial crisis.
2. The PMIs for China have all gone above 50 (for the first time since 2014), marking a turnaround from the low point earlier this year.
(via Tom Orlik)
3. A key reason behind the turnaround in China's economic data is the large scale monetary policy *and* fiscal policy easing that China has conducted over the past year; this is dramatically evident in the graph below which shows the benchmark interest rate and the budget deficit.
4. Another view on monetary stimulus is the massive amount of funding that has been pumped into the banking system by the People's Bank of China.
(via Chris Balding)
5. The impact is clear in this chart of private investment vs government investment - private investment has crashed, while state driven investment is surging.
(via Simon Rabinovitch)
6. China also looks set to depart from producer price deflation, as the annual change in PPI improved to the highest (slowest pace of deflation) since 2012, and this has taken many by surprise as the chart of PPI actual vs expectations shows.
7. The housing market has also been a major area of note, with prices surging in a speculative mania in the largest cities, and housing sales accelerating. However with a big glut of supply this is translating into only a mild pickup in housing starts so far.
(via Alex Frangos)
8. But all of this has had only a mild impact on the consumer. While there has been a minor improvement in retail sales growth, the trend has been for slowing growth; perhaps the government needs to focus more of its stimulus efforts on the consumer instead of investment...
(via Jeroen Blokland)