Quick Comment: As the US diets, China loses weight.

Good Morning.

SPECIAL CHINA COMMENT

Authored by GoldFix ZH Edit

Something noted a few month ago, is in a split mercantilistic world, the West fighting its domestic inflation causes the East’s deflation. That is starting to come up bigger now.We are seeing something creep up again in reports scanned; and it reminds us of early days in analysis at Lehman regarding Chinese spending habits.

Here it is:

The main problem in China is simple. They do not consume enough to justify their manufacturing capacity if the US stops buying stuff.

The Rate hike, War, and changing US behavioral patterns (even beyond those events) have reminded everyone of that. China still has not developed consumer goods demand.1

The US has stopped buying stuff for multiple reasons, not the least of which is higher rates. And what US consumers are spending on now, are *Services* which are domestic-made.

As Hartnett also recently reminded everyone:

If the US stops buying stuff, and China stops making stuff, you have 90% of the macro landscape.

So, until China either gets a new customer to replace the US, or ideally, converts their own population into spenders instead of savers, all the rate cuts in the world will not have the full desired effect they want for their domestic manufacturing economy.

Until then, as the US goes on a diet, China loses weight.

-VBL

Stocks are softer thus far on the back of weak Chinese data hitting everything equity based. The dollar is down small. Bond yields are up small. Stock indices are all weaker by 60 bps. Gold is down $4. Silver is down 16c and oil is down 60c. Last night multiple China economic data missed low. This time they did something about it.

• *CHINA JULY RETAIL SALES RISE 2.5% Y/Y; EST. 4%
• *CHINA JAN.-JULY FIXED INVESTMENT RISES 3.4% Y/Y; EST. 3.7%
• *CHINA JULY INDUSTRIAL OUTPUT RISES 3.7% Y/Y; EST. 4.3%
• *PBOC CUTS 7-DAY REVERSE REPO RATE TO 1.8% FROM 1.9%

Part of what they did was announce certain data will no longer be published.

*CHINA TO STOP PUBLISH DATA FOR YOUTH JOBLESS RATE

US Retail sales are today. This will reflect demand for goods, not for most domestic services, as discussed above.

Have a good one