via notayesmanseconomics:
We start the economic week with one of the wonders of the modern world, which is how China can produce its Gross Domestic Product or GDP numbers only 17 days after the end of the particular quarter. By contrast my own country the UK has switched to a slower production of quarterly numbers in an attempt to improve accuracy.Even Bloomberg is questioning things these days.
Chinese social media check in. Some Weibo users are questioning the authenticity of China’s economic data, calling the statistics bureau the most powerful government department — with a few adding that the abysmal jobless rates might be one of the only real data points.
I presume that means they think that things are weaker than we are being told. If we switch to quarterly growth this was nuanced.
The GDP in the second quarter was up by 0.8 percent quarter on quarter.
That was simultaneously quite a slowing ( from 2.2%) and better than the 0.5 expected.
But something caught my eye.
Remember, that 6.3% y/y growth rate — already quite a bit less than economists estimated — is less impressive when you consider it compares to a quarter in 2022 when Shanghai was under lockdown and other cities faced severe Covid-related restrictions. ( Bloomberg)
How can quarterly growth be higher and annual lower? That led me to suspect there has been some large revisions and it looks as though the quarter a year ago has gone from 3.9% to 3.2%. The end of 2022 went from 0.6% to 0.5% as well. So China has in fact ended up pretty much where it said it was at the end of the last quarter if we were to look at total GDP. It is not a little Orwellian where you have what is for these times good quarterly growth but you end up at the same total you started with.
Property
We have been following the slowing in this area for some time and thus this caught my eye in the investment section of the report.
and that in real estate development dropped by 7.9 percent. The floor space of commercial buildings sold reached 595.15 million square meters, down by 5.3 percent; and the total sales of commercial buildings were 6,309.2 billion yuan, up by 1.1 percent.
The numbers here have been falling for a while and due to the boom that was seen are significant for the overall economy. In essence the game here was to sing along with Yazz.
The only way is up, baby
For you and me now
The only way is up, baby
For you and me now
You buy with the expectation that prices will rise and the cycle repeats.Except that now we are seeing much more of this.
Chinese property developer Shimao Group Holdings paid Rmb24bn ($3.3bn) in 2017 for land earmarked for a prestige commercial project that would be dominated by a 500-metre-tall skyscraper, with commanding views of Shenzhen.
The price was a record at the time for the fast-growing southern city that borders Hong Kong, but six years on, those plans are unrealised and the land was put back up for sale this month at a heavily discounted $1.8bn. Yet it still received no bids in the online auction ordered by a Beijing court after Shimao had defaulted on its debts. ( Financial Times)
Things do not seem to be getting better.
#China‘s property sales between June and May showed the largest monthly drop this year. #Property sales by floor area declined 28.1% year-on-year, extending a 19.7% fall in May: Reuters ( @ChinaPropFocus)
Retail Sales
There is an attempt at bluster here.
In the first half year, the total retail sales of consumer goods reached 22,758.8 billion yuan, up by 8.2 percent year on year, 2.4 percentage points faster than that of the first quarter. Analyzed by different areas, the retail sales of consumer goods in urban areas reached 19,753.2 billion yuan, up by 8.1 percent year on year, and that in rural areas were 3,005.6 billion yuan, up by 8.4 percent
But the monthly numbers look really rather different to that.
In June, the total retail sales of consumer goods went up by 3.1 percent year on year, or up by 0.23 percent month on month.
There was an interesting nuance in the detail.
Catering at +16.1% is the only bright spot.
The consumer is spending on going out but not much else ( @sunchartist )
Unemployment
On the surface things looked okay.
In the first half year, the urban surveyed unemployment rate averaged 5.3 percent, down by 0.2 percentage points over that of the first quarter. In June, the surveyed unemployment rate in urban areas was 5.2 percent, the same as that of the previous month.
But then eyes switch to the level of youth unemployment.
Specifically, the surveyed unemployment rates of population aged from 16 to 24 and from 25 to 59 were 21.3 percent and 4.1 percent respectively.
That 21.3% is a record high although care is needed as such numbers have only been collected since 2018. It is also as an example now above that for Italy and looks set to deteriorate further.
An employment index for graduates compiled by the China Institute for Employment Research, a Beijing-based think-tank, has indicated an oversupply of labour for six quarters in a row since late 2021. The situation could get worse, with a record crop of 11.6mn university graduates entering the job market in June and July. ( Financial Times)
There are questions also about the quality of the work as we mull the issue of what we would call McJobs.
Yet many openings are in low-end work unattractive to university graduates. Beijing’s crackdown of the past few years on the technology, finance and gaming sectors has choked off opportunities in what were once appealing sources of employment. ( FT)
Industrial Production
This was the one figure that can be considered good.
In June, the value added of industrial enterprises above the designated size grew by 4.4 percent year on year, or up by 0.68 percent month on month.
This held in better than might have been expected. But the problem is that the outlook here is not too great either.
In June, the Purchasing Manager Index (PMI) of China’s manufacturing industry was 49.0 percent, increase 0.2 percentage point from the previous month, and the prosperity level of the manufacturing industry rose.
Comment
Our theme of slowing in the Chinese economy has stuck again and I see that others are beginning to catch up with us.
MORGAN STANLEY CUTS 2023 CHINA GDP FORECAST TO 5% FROM 5.7%. ( @financialjuice )
Although that still suggests an improvement on the 0.8% quarterly growth.
So there are struggles here and whilst growth is better than in the West it seems that China may be being affected as much by rising interest-rates over here as us. That brings me to another issue where China is weakening economically and is showing disinflation in a couple of areas as today has added a falling GDP deflator to Producer Prices. If I was a western central banker I would be taken note of that rather than pumping up rhetoric for more interest-rate rises.