August industrial production came in with a gain of 6.9%, which sounds great by Western standards. The problem is that this industrial output reading growth has been in the 8% and 9% handles for all of 2014. It wasn’t just the worst reading in a year, it was the worst reading in six years. TradingEconomics.com showed that the expected number was 8.8%, and the forecast was 8.16% for August.
Retail sales rose by 11.9% in August, down from 12.2% in July. TradingEconomics had a consensus estimate of 12.1% and a forecast of 12.08%. Only February and March had slower growth than this August report, and those were both at 0.8%. Imagine if U.S. retailers were complaining that 11.9% sales growth was weaker than expected.
Earlier this week, the National Bureau of Statistics of China reported that the consumer price index (CPI) rose by 0.2% month-over-month and rose by 2.0% year-over-year. Annual data showed food prices rising 3.0% and non-food prices up 1.5%. On average from January to August, the overall consumer prices were up by 2.2% over the same period of the previous year.
Also this week we saw news that the Producer Price Index (PPI) was negative, implying that CPI could fall further ahead. The PPI for manufactured goods fell by 1.2% year-over-year, and the PPI was down by 0.2% from July. The purchasing price index for manufactured goods went down by 1.4% annually and went down 0.1% sequentially. On average from January to August, the PPI decreased 1.6% year-on-year, and the purchasing price index for manufactured goods went down by 1.8% year-on-year.
China has been called the world’s growth engine by international market pundits for years. It is also expected that China will surpass the United States in economic output in the coming years. One month is not enough to derail either of these trends, but they are coming at a time when growth outside of the United States is very fragile.
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