1/6
Chinese consumption growth in October surprised on the upside, with annualized month-on-month growth (5.28%) exceeding that of industrial production (4.78%) by 0.5 percentage points. That's fine, but it's not nearly enough.
scmp.com/economy/china-… via @scmpnews
Chinese consumption growth in October surprised on the upside, with annualized month-on-month growth (5.28%) exceeding that of industrial production (4.78%) by 0.5 percentage points. That's fine, but it's not nearly enough.
scmp.com/economy/china-… via @scmpnews
2/6
Consider that retail sales for the first ten months of 2021 grew by an average of 4.0% a year in the past two years, while industrial production grew in that period by an average of 6.3%. This means that the consumption imbalance is much worse today than it was two years ago.
Consider that retail sales for the first ten months of 2021 grew by an average of 4.0% a year in the past two years, while industrial production grew in that period by an average of 6.3%. This means that the consumption imbalance is much worse today than it was two years ago.
3/6
If consumption growth continues to outpace production growth, can the former grow fast enough relative to the latter that next year the consumption imbalance is no worse than it was in 2019?
If consumption growth continues to outpace production growth, can the former grow fast enough relative to the latter that next year the consumption imbalance is no worse than it was in 2019?
4/6
The math is pretty easy, and depends on how much GDP grows next year, but basically annual retail sales growth must outpace annual growth in industrial production by roughly 4.7 percentage points next year to get us back to 2019 levels.
The math is pretty easy, and depends on how much GDP grows next year, but basically annual retail sales growth must outpace annual growth in industrial production by roughly 4.7 percentage points next year to get us back to 2019 levels.
5/6
Is that likely? In the first ten months of this year, when most of the reversal in 2020's consumption contraction has taken place, the gap between the two was only 4.0 percentage points, and in the last month, the gap has dropped to half a percentage point.
Is that likely? In the first ten months of this year, when most of the reversal in 2020's consumption contraction has taken place, the gap between the two was only 4.0 percentage points, and in the last month, the gap has dropped to half a percentage point.
6/6
That makes it pretty clear that unless Beijing takes dramatic steps to accelerate the rebalancing process, it is unlikely that we will return to 2019 levels of imbalance by 2022, or even 2023.
That makes it pretty clear that unless Beijing takes dramatic steps to accelerate the rebalancing process, it is unlikely that we will return to 2019 levels of imbalance by 2022, or even 2023.
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