Put on the Pain Trades: China FAI Begins Slowdown Near Prior Cycle Lows
Here’s the quick summary of the data:
1. Real estate investment is strongest relative to prior cycles
2. Fixed asset investment over the past three months is slower than it has ever been, and the downturn hasn’t officially begun
3. Private fixed asset investment is near the prior cycle lows (set in spring 2016)
Implication: if the credit cycle isn’t aborted earlier than before, it looks like nearly all measures of FAI could fall into full blown recession (at least mid-single digit declines in some categories) before growth bottoms out. That’s assuming another bailout later next year.
As for the data:
China real estate investment growth was 5.6 percent in October, second slowest month in 2017 (after July’s 4.8 percent). YTD growth fell from 8.1 to 7.8 percent.
Fixed asset investment (FAI) slowed to 3.2 percent, YTD slowed from 7.5 to 7.3 percent. Unlike real estate investment growth (not pictured), you can see FAI is potentially breaking down to an unprecedented pace.
Private FAI slowed to 1.2 percent growth in October; slowed from 6.0 to 5.8 percent growth YTD. The last time growth was this slow, there was a panic over private money pulling out of FAI. One post of the subject was Depression: State Council Investigates Drop in Private Investment
Private investment growth in the industrial sectors was negative for the second consecutive month.
All data from NBS.