China Growth Tracker: Lockdown Lows
- By Mirza Baig and Liang Ding
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Summary
- We revised our forecast for aggregated demand growth in August from 6.4% to 4.4% with the updated car sales data. Despite the upgraded trade-in program for the cars, car sales in August increased only 0.4% on a YoY base.
- Construction activities stayed weak in September with cement production down 1% on a YoY base. However, our calculation may underestimate FAI growth. In recent months, infrastructure spending on the electricity grid has accelerated.
- Container throughput data shows a 4% MoM export volume decline so far in September, aligning with a broad-based decline in the export shipping freight index (CCFI). However, due to a low base last September, the YoY export growth rate is expected to rise to 15%.
- The decline in YoY nationwide new home sales has accelerated in September (YoY change dropped to -38% vs -27% in August based on HF data). After a positive YoY increase (7.6%) in tier 1 cities last month, the YoY change dipped to -29% in the first half of September. The volatile HF data shows prices rose in August (0.4%) but fell back in September (-1%).
- Our Market index for China growth has fallen to ‘Lockdown lows’, with broad declines in commodity prices and Chinese equities. Bond yields fell to a new historic low.
Market Implications
- Investors are losing confidence in Chinese macro policy. Market prices, financial media and analyst commentary is approaching doom and gloom. Unless authorities act now, sentiment could become self-fulfilling.
