Does November data provide a glimmer of hope for China’s economy? At first glance, maybe. Industrial and retail sales respectively grew 6.6% and 10.1% on a year-over-year basis.
However, these figures are misleading. A harsh Covid-19 lockdown severely constrained China’s economy last November. It follows logically that this November’s data was outstanding by comparison.
Realistically, China’s economy is far from a much-needed rebound. In fact, China’s November retail sales actually decreased, when considering them on a month-on-month, seasonally adjusted basis.
More broadly, other data alludes to a weak Chinese economy. Home prices and sales both waned in November. Manufacturing and services activity is currently stagnating. Inflation data particularly reflects this. As the following chart from The Wall Street Journal demonstrates, the services sector is experiencing a deflationary trend. Deflation at-large is an issue, even when controlling for food and energy prices. This decrease in price levels is a strong indicator of generally weak domestic consumer demand, which contributes significantly to China’s sluggish performance. More broadly, the teetering of the world’s second largest economy poses greater uncertainties for global markets.
The display of November’s year-over-year data is a clever tactic, but it cannot mask China’s current economic woes.
Sources: Nathaniel Taplin, The Wall Street Journal; Stella Yifan Xie, The Wall Street Journal; Lydia DePillis, The New York Times
Reade Ben is a policy analyst at the Manhattan Institute.
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