Chart of the month: China a country to watch
Concerns about the outlook for the global economy in 2019 are heightened. A key worry is that slowing economic growth in China will undermine international trade activity, as growth in Chinese consumer spending slows.
In From the beach 2019, Infometrics Chief Forecaster Gareth Kiernan points out that economic indicators from China have been generally softening over the last year. Throughout 2019, we will continue to watch China’s economic data closely to see whether this slowdown intensifies.
As our chart of the month shows, Chinese retail spending growth softened considerably at the end of 2017 and held at this lower rate during 2018. If, as this data suggests, Chinese consumers aren’t opening their wallets like they used to, there won’t be the same growth in demand for goods exported to China. This lower global demand and global consumption hit could drive both Chinese growth lower, as well as dampen exporters’ earnings globally.
Chinese GDP growth has been slowing over the last few years, but recently has been below the official Chinese government target of 6.5%pa. This growth target has been lowered to 6.0% for 2019. But suspicions remain over the veracity of official Chinese GDP data, so we’ve got a few other data sources we monitor as well to keep tabs on China’s economy. As we pointed out in this NZ Herald article, we also track electricity production, freight levels, and lending data.
Regardless of which indicators you watch, it appears that Chinese growth is drifting lower. China has contributed 30% of the global economy’s growth since 2013, compared to 11-13% from each of India, the European Union, and the United States. In other words, the effects of any Chinese slowdown on the global economy are unavoidable.