The investing world has largely given up on China as a growth driver this year and the outlook for 2025 continues to dim, with officials showing no urgency to turn the tide.
On the weekend, new house prices fell for the 15th consecutive month. And not y/y drop but monthly. The last three months of data show monthly declines of:
- June -0.67%.
- July -0.65%
- August -0.73%
Existing home sales are no better and are down for 16 straight months.
On the industrial side it’s just as bleak with steel activity cratering once again.
The growth target of 5% for this year looks unachievable at this point, even with stimulus. Goldman Sachs, Citigroup and Morgan Stanley all lowered forecasts.
So the focus will shift to 2025 and the PBOC may be prepared to act. The People’s Bank of China released a rare statement alongside disappointing credit data and indicated upcoming easing.
“We
will make maintaining price stability and pushing for the mild rebound
in prices an important consideration for monetary policy and meet
reasonable financing demand for consumption in a more targeted way,” the PBOC said, adding that it is “preparing to launch some additional measures, further lower the
financing costs for businesses and households, and keep liquidity
reasonably ample.”
How they plan to stimulate is unclear but I would expect leaks in the week or so ahead. Even with that, I think it will take coordinated and surprisingly strong action from the central government to turn the tide as weakness becomes entrenched.
If they do come out with a sledgehammer, it could overshadow Fed easing this week. That said, they may want to keep the powder dry until after the US election.
