We will soon get a glimpse of how the Chinese economy was doing in July and to see if it has indeed reached a bottom as most are hoping for (here is a preview of the coming macro data releases).
There are, of course, reasons to be both optimistic and pessimistic about the bottoming. As the Chinese government has put growth to a top priority and as local governments are announcing massive investment plans (never mind if they will actually be implemented in full for the moment), there is high hope that the effect will start kicking in soon. On the other hand, data are not particularly convincing in this respect, and we increasingly believe that should growth ever pick up in Q3 or Q4, it will be a rather short-lived one, not a self-sustaining one.
Ahead of the data releases, here is a interesting indicator that we haven’t written about before. The chart below is a leading indicator jointly developed by National Bureau of Statistics and Goldman Sachs. So far, the leading indicator continues to slide.
Source: Bloomberg, NBS
Here is a description of the leading indicator, via Goldman Sachs:
It contains information on money supply, foreign direct investment contractual value, andShanghai stock market turnover, as well as:
Interest rate spread is the difference between the weighted-average yield of the seven-year or above Treasury bond with those of one year or less.
Consumer Expectation Index is compiled by the CEMAC using a monthly survey conducted in thirty major cities covering 70,000 individuals.
Ratio of industrial sales to production is the ratio of the total value of industrial sales divided by the total value of industrial production in the same month. This ratio tries to capture the inventory cycle in the industrial sector. Industries included are mining and manufacturing.
Number of new investment projects started tracks the number of new fixed-asset investment projects started. The government uses this as a leading indicator for future investment growth and economic expansion.
Index of Logistics refer to the volume of freight transportation and total tonnage of cargo reported by sixteen major coastal ports.