The Chinese are well past their trough, so there may be some meaningful interpretations for us to take from their data. Then again, we already know there’s not much there from China’s trade figures. Exercise caution, in other words.
One key reason why is that China’s going to get hit with a second wave. Virus outbreak maybe, economic disruption definitely. The earlier numbers for the Big 3 stats, Industrial Production, Retail Sales, and Fixed Asset Investment (FAI), all tanked during the combined January-February period. That means China’s March-April comeback is about to meet up with the rest of the world’s inventory bloat.
That may be why the “V” so far in the Chinese estimates on the comeback is less “V” than maybe had been hoped. Then again, there’s really nothing to compare them to, so take everything with more than the usual caveats.
The raw numbers: IP +3.9% year-over-year in April, 2020’s first positive; RS -7.5%, better than March’s -15.8% but since the lowest prior month had been +7.2% consumer spending remains way behind and depressed; and FAI at -10.3% accumulated (Jan – April), though being boosted by State-owned FAI (-6.9%) rather than the private side (-13.3%).
Any setback in May is not necessarily fatal to the “V” case, merely synchronizing China with the rest of the world. That may already be why there’s less “V” in April’s data outside of IP which has the most “V” but which was due to one-time 5G hopes more than anything else (production of industrial robots rose 27% year-over-year while the manufacture of integrated circuits surged by just less than 30%). Those aren’t going to get repeated.
Time will tell for that statistic, as the rest, though most expect China’s PMI’s to tumble again beginning in a few weeks. Not January-February tumble, but another sustained spell significantly underneath 50 (especially in June). Then after that, the real story begins.
Maybe that’s the best way to read these figures right now: more cautious than anything, particularly private economy data like FAI and retail sales.
