19 March 2015

China’s Economy is Slowing Down

One of the more interesting aspects to the global economy is how interconnected everything is. The major economies of the world all find themselves in a challenging economic environment where growth is hard to come by. England, the Euro currency region, Japan and the US all face significant problems with debt and a lack of real growth.

One of the bright spots for the world economy has been the growth of China. Much has been written about the China story and its rise as a major economic powerhouse. However, after years of credit growth and access to cheap money the country is showing signs that it too may fall victim to excessive debt loads and too much easy money.

The Numbers do not Look Good

According to an article in Yahoo Finance, data recently released for the January-February time period shows that China’s economy may be slowing at a faster pace that previously thought. 

  • A 6.8% year-over-year growth in industrial production is "the weakest year-over-year reading ever (China’s IP data starts from 1995) outside the global financial crisis," according to Goldman Sachs.
  • Year-over-year retail sales growth of 10.7% is the lowest in over 9 years, according to   IHS
  • A 13.9% year-over-year increase in fixed-assets investment is the lowest in 14 years, according to IHS.
  • The Producer Price Index fell 4.8% vs. the prior year, the steepest drop since 2009.
  • Electrical consumption rose just 1.9% year-over-year after climbing 3.2% in 2014, the weakest in 16 years.

 (Source: Yahoo Finance March 2015 March 12th)

More Easing by China?

Recently the Peoples Bank of China lowered interest rates for the second time in a little more than 3 months. Since data for January and February was so poor it increases the likelihood of further policy easing by China.

On the positive side, China is still growing and will be a dominate force in the global economy long term. However, there will undoubtedly be setbacks along the way. A protracted slowdown in China could have significant implications on the global economy.

Further easing by China will just add more turbulence to the currency markets and could add another level of instability to the financial system. This is why the physical precious metals are so vital right now. With Central Banks so active in the markets it is possible that Gold and Silver will soon outperform every currency on the planet. 

Author: celticgold.eu

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