Global Macro – China

China’s economic setup has broad implications for global economic activity, and ultimately that global dynamic may influence the trajectory of U.S. economic activity.

Chinese real GDP growth slowed to 4.7% y/y in 2Q24 from 5.3% in the prior quarter. Underneath the headline number, Services decelerated the most on a rate of change basis from 5.0% y/y to 4.2%. Industry & Construction decelerated to 5.6% y/y from 6.0%, while Agriculture accelerated to 3.6% y/y from 3.3%. Overall, Final Consumption Expenditures contributed 3.9% (down from 4.2%) of the total 4.7% print, followed by 0.8% (up from -0.2%) from Net Exports and 0.6% (down from 1.2%) from Gross Capital Formation. One of the key highlights from this release is on the global trade front. Despite the slowdown in domestic demand, net exports accelerated in the GDP report and exports accelerated in June’s monthly trade report from 7.6% y/y to 8.6%, which is a positive sign for global demand.

Source: Macrobond.

Separately, several data points were released last week that provide more insight into China’s economic setup. Industrial production decelerated from 5.6% y/y to 5.3% in June, against a 4.4% comparison that mostly gets tougher through the rest of the year. Retail sales slowed to 2.0% y/y from 3.7%, against a 3.1% comparison that also gets tougher through the end of the year. Lastly, outstanding loan growth fell to another record low y/y rate at 8.9%.

Source: Macrobond.

Over a year ago now, China was set to rebound and help lift global activity. More than eighteen months later, there has yet to be a material change in trajectory and most of the data remains historically weak. We will continue to track movements in Chinese data closely given its role in the global economic picture.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.