The numbers are beginning to turn distinctly unpleasant for China, perhaps harkening a deeper downturn than economists had anticipated. It’s early days yet and even by the “there are lies, damned lies and then there are statistics” standard, China’s official numbers are always suspect. But these latest figures may be the reason the stimulus package was larger than many people had expected. An important number is industrial production, whose growth slowed to 8.2 per cent year on year in October, below the predicted level and well down from 11.4 in the preceding month and 17.8 in August. This is an closely watched figure and some economists (here) were even quoted as wondering whether its decline might force them to reconsider the possibility that GDP growth could slip to 5 per cent in 2009, a level at which many analysts think China’s simmering unemployment problem could explode. Meanwhile, China’s trade surplus was basically unchanged in October from a year earlier at 215 billion. It’s still huge but the fact that growth has ground to a halt could be indicative of a drop to come, particularly with the Euro weakening.
One bright spot, some might say, was retail sales, where growth barely slipped to 22% year-on-year in October, down slightly from 23.2% in both September and August. This is an important number because of the emphasis the government is putting on stoking domestic demand to replace declining exports. like consumers themselves, this can be It can be fickle figure. It appears that consumers in China aren’t spooked yet, but given they are already the world’s number one savers, they could do a serious turtle act if they do get worried. Watch that number in the coming months.
Despite gloomsters like myself, some people are still optimistic –or maybe haven’t read the papers for a few months. I got an email a few days ago advising me that, according to the newly-released 7th edition of Bain & Company’s Luxury Goods Worldwide Market Study, “China’s projected 30% average annual growth (in sales of luxury goods) suggests optimism for the long-term luxury outlook, pushing China’s luxury sales over $5bn before 2010.”
Praise the Lord and pass the Prada.