China’s economy slows again as trade war risks global slump

Bloomberg

China’s slowdown is deepening just as risks for the global economy mount, piling pressure on the authorities to do more to support growth.
Industrial output rose 4.4 percent from a year earlier in August, the lowest for a single month since 2002, while retail sales came in below expectations. Fixed-asset investment slowed to 5.5 percent in the first eight months, with the private sector lagging state investment for the 6th month.
The data add support to the argument that policy makers’ efforts to brake the slowing economy aren’t sufficient as the nation grapples with structural downward pressure at home, the risk of yet-higher tariffs on exports to the US and now surging oil prices. Nomura International Ltd said this all raises the likelihood that the People’s Bank of China will cut its medium-term lending rate on Tuesday.
“In terms of policy room, we still think there’s quite a lot for both the Ministry of Finance and the PBOC, but now it’s a matter of whether they want to use it,” Helen Qiao, chief Greater China economist at Bank of America Merrill Lynch said on Bloomberg Television. “What I worry about is that policy makers are hesitating at the moment because of the potential implications on the long term impact, so they’re really fallen behind the curve.”
The Shanghai Composite swung between gains and losses before closing for lunch up 0.1 percent. Futures contracts on China’s 10-year government bond erased loss of 0.28 percent to trade 0.09 percent higher.
The slowdown in output was almost across the board, with food processing and general equipment manufacturing unchanged from last year.
Car output rose after declining for four months. Growth in sales of consumer goods slowed to 7.2 percent, the lowest since April this year, but there was an increase in food sales.
The unemployment rate fell to 5.2 percent from 5.3 percent in July, within the narrow band it has occupied all year even amid the slowdown.
After China’s data release by the National Bureau of Statistics, Citigroup Inc lowered its growth forecast for the world’s second-biggest economy to
6.2 percent for this year from 6.3 percent previously, and to 5.8 percent from 6 percent
for 2020.
“We don’t expect a growth rebound in the fourth quarter anymore, with the new forecast flat at 6.1 percent year on year,” wrote Yu Xiangrong, a Hong Kong-based economist with Citigroup, referring to the quarterly outlook.
“In particular, we now hold a more cautious view on the recovery of infrastructure investment and retail sales.”
The People’s Bank of China cut the amount of cash banks must hold as reserves this month to the lowest level since 2007, though it’s still holding off on cutting borrowing costs more broadly.
Some 265 billion yuan ($37.5 billion) of 1-year loans from the PBOC to banks will mature on Tuesday.
The central bank will likely roll-over at least some of these, giving it an opportunity to cut the rate it charges.
Analysts are divided on whether the PBOC would actually take the chance to cut.