'Something is definitely off with China’s economy': Yardeni Research

Data suggests that the end of the pandemic lockdown imposed has not delivered the boost to China's economy, according to the consultancy. (Photo by Manuel Joseph/Pexels)

China’s export numbers from June are showing signs of a weakening economy, according to Yardeni Research. This indication is confirmed by the trend in the country’s producer price index (PPI), which has fallen to -5.4 percent, it added.

PPI is a measure of inflation determined by the costs incurred by the industry or producers.

According to the sell-side consultancy, headed by noted economist and investment strategist Ed Yardeni, the key indicators to watch out for now will be China's trade data and PPI inflation rates.

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“It's not quite the great fall of China, but something is definitely off with China's economy. June's trade data showed that Chinese exports fell again, and imports have remained flat since mid-2021,” stated a tweet by Yardeni Research. Data from China’s Customs Bureau released last week showed that outbound shipments from China fell 12.4 percent year-on-year in June, after a drop of 7.5 percent YoY in May. The June numbers were worse than what had been expected.

This data suggests that the end of the pandemic lockdown imposed has not delivered the boost to the country’s economy, as had been expected, according to the research firm.

The tweet stated, “the latest trade data (above) suggests that this isn’t happening”.

In a news conference held in Beijing, the spokesperson for the General Administration of Customs, Lv Daliang linked the poor export performance to slowing global growth and investment and to increasing protectionism.

A Reuters report noted, “Exports to the United States - the top destination for Chinese goods - have fallen the most among its major trading partners over the first half of the year, as diplomatic tensions mount over chip technology and other issues, while exports to Russia have risen sharply, although from a modest level.”

Yardeni Research stated that the weakness in the economy is not just showing up in the trade figures but also in the country’s PPI.

“It (PPI) fell -5.4% y/y through June. CPI was unchanged over the same period,” it stated. PPI is considered a good indicator of the trend in CPI (consumer price index).

The fall in PPI in China could tell us what is coming in the US economy, too.

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“China's PPI inflation rate tends to be a leading indicator for the US PPI for finished goods, which fell -2.8% y/y in June,” the tweet stated.