China q/q and y/y GDP below consensus, +0.7% vs +1.1% cons, +4.7% vs. +5.1% cons (Bloomberg).
Here’re q/q (not annualized) rates:
Source: NBS via TradingEconomics.com.
From Bloomberg:
Gross domestic product expanded 4.7% in the second quarter from the same period a year earlier, weaker than all except one of 28 estimates in a Bloomberg survey of economists. Retail sales rose at the slowest monthly pace since December 2022, showing a flurry of government efforts to juice confidence have done little to reinvigorate the Chinese consumer.
Here are pictures of additional series:
Source: Bloomberg.
Recently at a WEF event (aka “summer Davos”), Premier Li Qiang signalled that no shock therapy would be forthcoming (FT):
In the wake of the pandemic, China’s economy was like a patient recovering from a serious illness, Li said. “According to Chinese medical theory, at this time, we cannot use strong medicine. We should precisely adjust and slowly nurture [the economy], allowing the body to gradually recover”.
Natixis urges us to focus not on short run wiggles, but the trend decline in growth and in inflation, with y/y nominal GDP growth at +4%, (as compared to real at +4.7%). Note that June CPI decreased at 0.2% m/m.
As a personal aside, I’m dubious about the efficacy of “Chinese medicine” if by this term one means the traditional herbs and roots (and other things you don’t want to hear too much about) used in the past. I’d say some strong medicine is needed, although my definition of strong medicine likely differs from that forwarded by the CCP leadership. My definition includes a move away from the increasingly dirigiste and state owned enterprise centered approach, so that policy uncertainty is stabilized for an extended period.
Figure 1: Economic Policy Uncertainty for China (Mainland Newspapers) (blue line). ECRI peak-to-trough recession dates shaded gray. Source: policyuncertainty.com via FRED, ECRI.
Speaking of clueless state leaders
https://www.theguardian.com/world/article/2024/jul/15/journalist-masha-gessen-russia-conviction
Again, remember, Putin is the guy donald trump has a man-crush on. Really cool playing pals with a man who kills women and children. This is what Catholics and southern fundamentalists label being “pro life”??
For our astronomy fans out there:
https://www.theguardian.com/science/article/2024/jul/15/underground-cave-found-on-moon-could-be-ideal-base-for-explorers
Vance as Trump’s VP running mate shows two things:
(1) Trump wants his side to be throwing flame throwing bombs while he expects to the Democrats to be choir boys. Yea – you knew this was coming too.
(2) Trump has picked to be his running mate somehow totally unqualified to be President. Of course the person at the top of the ticket has 4 years in office proving he was never qualified to be President.
MAGA!
Sure the GOP would like to see any negative talk about project 2025 (created by former Trump cabinet members) to be off limits and dangerous to the life of the Presidential candidate. Trump has actually changed his acceptance speech to try and get democrats to stop revealing his plans.
There has been a lot of GOP vice-presidents picked from the “don’t kill me or this guy will become president” principle.
That’s not a very nice thing to say about Dan Quayle.
At least I didn’t call him a potatoe
Chinese economic tools focus on investment. The result has been, variously:
– a rapid increase in factory output, much of which was exported, some of which produces low returns and is subsidized
– a rapid increase in public infrastructure, much of which yields very low social returns, some of which famously provides no social return
– a rapid increase in residential construction, with consumers and lenders holding the bag for huge numbers of unfinished units – unfinished units which provide social no return
You don’t need to be a neo-liberal apologist to see the problem here. The state swings its credit hose from sector to sector, driving down marginal returns, unbalanced the economy and piling up debt, with little connection to actual demand.
The BBG chart showing industrial production rising while retail sales fall is another look at the same problem. Two possible explanations come to mind for that mismatch – either consumers don’t want what’s being produced, or they don’t feel they can afford it. If the State supported households instead of investment, household purchases would tell producers what to make and how much of it. Returns would be supported by demand, not driven down by excessive investment made with the goal of hitting arbitrary production targets.
There certainly is a mismatch when the government is unwilling to use strong measures to address a large problem. But perhaps the greater problem is using the wrong measures.
If economic policy makers see what I see – that their preferred tools are piling up problems without doing much good – then they are prudent to cut back. Even more prudent would be to turn their attention to the only sector that hasn’t soaked in a firehose of directed credit: the household sector.
On the third point I think it is very important to note that when the consumers hold the bag on unfinished or even finished units that they have to pay for but cannot sell that is a drag on personal consumption. Real estate is one of the main savings vehicles in that country because nobody trust banks. That may be one of the main drivers of the dismal retail numbers. Domestic consumption is the only way for China to continue to grow. They are way too big to grow on exports, even if the developed countries would allow it.
Trump Chooses J.D. Vance, Who Once Called Trump “America’s Hitler,” as His VP
The Ohio senator is known to many as a political opportunist who has cozied up to racists and the wealthy.
https://truthout.org/articles/j-d-vance-who-once-called-trump-americas-hitler-tapped-for-trump-vp/
Donald Trump announced on Monday that he has chosen J.D. Vance as his running mate for the 2024 election — an opportunistic Republican senator from Ohio with a history of criticizing Trump and promoting white supremacist ideas….Vance, a venture capitalist who regularly cavorts with fascists and racists, was elected to the Senate in 2022 with no previous experience in an elected position. Though he first came to prominence for detailing his working class background in his much-criticized memoir, Hillbilly Elegy, and has positioned himself as a populist, he now bears a close resemblance to the rich elites he publicly disparages. When he first became a pop culture figure, Vance was known for being a never-Trump conservative who loudly and consistently denounced the former president. When Trump was on the campaign trail in 2016, Vance wrote in a New York Times op-ed that he believed Trump is “unfit for our nation’s highest office” and argued in a Guardian op-ed that Trump was not fit to govern for the white working class. He once said that Trump was akin to “America’s Hitler.”
Of course Democrats are not allowed to raise such facts as they might be encouraging some deranged registered Republicans to get a gun and start shooting.
It’s happening again: the Republican Party is projecting its own flaws and failures onto Democrats. You all know the list:
– Busting the budget
– Jiggering elections
– Saying mean things about “our” people
– Lying
– Ruining our image abroad
– Trying to ruin Social Security
– Siding with the powerful against the weak
– Fostering crime
The new addition to the list is fomenting political violence. The Party that has winked at racial violence and called insurrectionists patriots now says there is no place in this country for political violence. We’re being treated to swing-to-the-middle unity rhetoric from Trump while his vice presidential choice blames Biden for inciting political violence.
Who claims unlimited rights to carry deadly weapons as a means to ensure against tyranny and then says there is no place for political violence? How can there be “good people on both sides” of the issue of white supremacy if there is no place for political divisiveness? How does one tell the Proud Boys to “stand by” and then lecture us about unity and civility?
If course, this is not new. It’s just an amped-up version of Republicans making “liberal” and “woke” and “leftist” and “urban” into dirty words and then accusing their political rivals of being uncivil. How dare we defend ourselves against Republican propaganda?
The world is not suddenly different because the Republic-fostered U.S. death cult attacked one of its own. They just want to blackmail everyone into saying that it has.
More off-topic stuff – Noah Smith on Republicans’ attempt to blame the Pennsylvania shootings on Biden and Democrats, and the implications for the U.S. and the world over the coming years:
https://www.noahpinion.blog/p/how-can-america-be-stabilized
The title is misleading. Smith has less to say about how to stabilize the U.S. than about how likely it is the U.S. will remain destabilized. He doesn’t go very far into implications for the rest of the world, so I will. Wars are on the rise for the first time since WWII, very likely because the U.S. seems less likely to intervene than since just after the Vietnam War. And just after the Vietnam War, China was a midget in geopolitics compared to today. If the U.S. example to the world is further tarnished, if U.S. involvement in the world is reduced, if U.S. support for our allies is uncertain, the world is going to change very fast.
Madeleine Albright called the U.S. “the essential country”. In less grand terms, the U.S. is the glue that holds things together. A second Trump presidency, focused on personal gain, retribution and gaining a lock on power, means the glue will crack.
Notice one of the blame Biden tweets came from “US Senator” J. D. Vance. And guess who Trump picked to be his running mate?
I hope Democrats have had the good sense to buy advertising time around the Republican convention. They can quote every mean thing Vance ever said about Trump. They can run Lincoln Project ads. They can run footage of Trump as he really is, in contrast to the “nice” Trump we’re about to see on stage.
Apparently President Xi isn’t familiar with the lessons from John von Neumann’s theory of an expanding economy. You can’t just arbitrarily target some production level.