Another point of view

There is an interesting analysis made by Financial Times investment editor, James Mackintosh, who claims that slowdown in the China economy is now significant and a grim data could suggest a potential recession in USA. Despite of the fact that I am still bullish (as I claimed it in recent posts), this analysis is very reasonable. Let’s take a look for it more closely.

Below we can see data from Chinese exports, year on year growth. Blue line is a moving average as a good tool to smooth seasonal noise. Last Thursday the data was still positive – 17 percent growth y/y in exports. However, it was less than market expectations and far too little than number in previous month. The trend is deteriorating as it was to be in the beginning of 2008.


Source: Finanacial Times

All of this is also represented by Managers indexes in China who confirmed concern about lower external demand. The stagnation in manufacturing sector continued in September, according to HSBC research. As we can read the report published on September 30, manufacturing output rose marginal, but new export business declines for fifth month in succession. Furthermore, it is very possible that industrial activity will continue to cool as the result of lagged effects of credit tightening. It’s curious whether the slowdown in China will cause a serious problems in USA or Europe. We will see.


Source: HSBC