Helping you navigate the new normal
Brazil, Russia, India and China disappoint as manufacturers face investment demands of EVs © Bloomberg Less than a third of China’s 31,000 auto dealers were profitable in the first half of 2019, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Auto markets in the Bric countries are
Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the economic boost of previous years © Bloomberg China’s falling producer price index suggests it could soon be exporting deflation, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog On the surface, this year’s jump in China’s total
Last November, I wrote one of my “most-read posts”, titled Global smartphone recession confirms consumer downturn. The only strange thing was that most people read it several weeks later on 3 January, after Apple announced its China sales had fallen due to the economic downturn. Why did Apple and financial markets only then discover that smartphone sales
Last year it was Bitcoin, in 2016 it was the near-doubling in US 10-year interest rates, and in 2015 was the oil price fall. This year, once again, there is really only one candidate for ‘Chart of the Year’ – it has to be the collapse of China’s shadow banking bubble: It averaged around $20bn/month
The chemical industry is the best leading indicator for the global economy. And my visit to Singapore last week confirmed that the downturn underway in the Asian market creates major risks for developed and emerging economies alike. The problem is focused on China’s likely move into recession, now its stimulus policies are finally being unwound.
Companies and investors are starting to finalise their plans for the coming year. Many are assuming that the global economy will grow by 3% – 3.5%, and are setting targets on the basis of “business as usual”. This has been a reasonable assumption for the past 25 years, as the chart confirms for the US economy:
I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeting for the Great Unknown in 2018 – 2020‘. Many readers found it difficult to believe that global interest rates could rise significantly, or that China’s economy would slow and that protectionism would rise under the influence of Populist politicians. […]
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2016 data highlights one startling statistic about the world’s Top 7 auto markets. They are 85% of total world sales and as the chart shows, their overall sales growth since 2007 has been entirely due to China: China’s sales have risen nearly four-fold since 2007, from 6.3m to 24.2m Sales in […]
The changes underway in China’s lending policies are far more significant that anything being planned by central banks in Tokyo, Frankfurt or Washington as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Investors’ attention remains focused on the minutiae of central bank policies in the developed world. But they might spare a […]
‘Bad news’ seems to have become ‘good news’ as far as China’s economy is concerned. In the past, most analysts simply ignored the possibility of a major slowdown. Now that the slowdown is underway, they still ignore it – this time, because they are sure further stimulus is just around the corner. But time passes, […]
Everyone seems sure that China’s government is about to undertake major new stimulus. Thus Reuters reported: “Economists said it was a matter of when, not if, China eased policy again after economic growth in Q1 cooled to 7%, a level not seen since the depths of the 2008/09 global financial crisis. Indeed, some analysts have […]
We’ve all had that moment of jumping into the car, and turning on the ignition, only to realise we forgot to fill up the fuel tank on the last journey. US auto sales data for April is flashing that same familiar orange warning light. From the outside, everything looked fine with the data. Although there […]
A strange thing happened to German 10-year interest rates last week – they rose quite sharply, by a further 0.2%. That may not sound a lot, but it is when the starting point is so low. On 20 April, they were at 0.07%, and on Friday they closed at 0.37% – for a total rise […]
China’s interest bill this year is around $1.7tn, according to ratings agency Fitch. And no, the “tn” isn’t a typo. China’s interest bill is indeed around the total size of India’s economy, and larger than the economies of S Korea ($1.3tn), Spain ($1.4tn) or Mexico ($1.3tn). Common sense tells us that no economy can afford […]
More and more evidence is emerging of the major slowdown now underway in China’s economy. China’s leadership have warned this would take place since they took office 2 years ago. And they have reinforced the message in recent months with their focus on explaining the move into the New Normal and its consequences. A major interview […]
Its amazing what a lending bubble can do in the short-term, as the above chart shows. It updates my August post for the Financial Times, and highlights the astonishing rise in China’s bank lending since 2008 on the x-axis, and the remarkable rise in auto sales on the y-axis. Official data shows average disposable income last […]
The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem China’s July lending level of just Rmb 385bn ($62.6bn) has surprised financial markets, which were expecting an increase in stimulus. But bigger surprises may lie ahead. The strong link between lending and passenger car sales […]
Despite all the positive headlines, the world’s two largest economies have failed to deliver sustained recovery, even though the 2 governments have now spent a combined $20tn in stimulus and lending. US STIMULUS REACHES $10tn The US government and Federal Reserve have spent $10tn since the Great Recession began in 2008. Federal deficits have increased by $6.27tn, whilst […]
The blog got 54.8m results from Google when it entered the phrase “China GDP” this week. The only problem, seemingly unrecognised by most analysts, is that China’s GDP report is a completely fictitious number, invented by the leadership each quarter to suit its own narrative. This sounds a bold statement, but it isn’t: China is the only country to […]
China’s growth has been the main support for the global economy since the Crisis began in Q4 2008. The slide above captures the extent of this in polyethylene (PE), one of the world’s largest chemical markets, based on data from China’s chemical association and Global Trade Information Services: The total market grew 11% in the 3 […]
Last week the US Federal Reserve announced the second move in its so-called tapering process, and reduced its bond buying by another $10bn/month. But there was only a temporary repeat in stock markets of the enthusiastic response to its first reduction in December. We are thus about to test whether the blog’s theory of ‘two steps and a […]
The blog’s views on the unsustainability of China’s epic economic growth since 2009 have now become truly mainstream. Everyone now agrees, including the new leadership, that it was created by a credit bubble. State-owned China Daily has even now warned …