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    China's GDP Growth Falls below 7 Percent, but by How Much?

    China joined the United States and Japan in relative decline in the third quarter leaving the European Monetary Union as the sole major economic bloc expecting stronger economic growth in 2015.

    Gross domestic production expansion in the world’s second largest economy dropped to a 6.9 percent annual rate, better than the 6.8 percent forecast, but still the slowest pace since the financial crisis. It was the second weakest quarterly average in more than 20 years. Since 1992 only the last quarter of 1999 at 6.7 percent has been slower. The Chinese economy expanded at 7.3 percent in 2014.

    In the United States third quarter GDP is expected to fall by more than half to 1.9 percent annually from 3.9 percent in second quarter. The Atlanta Fed's GDPNow calculation, one of the most accurate GDP estimates, is forecasting an annual growth rate of just 0.9 percent in the three months that ended in September.

    Even if the higher estimate proves correct, American GDP for the first three quarters in the will have fallen from 2.4 percent in 2014 to 2.1 percent. If the Atlanta estimate is accurate growth will have dropped to 1.8 percent. Few analysts are expecting a substantial improvement in the U.S. economy in the fourth quarter. 

    The latest International Monetary Fund (IMF) projection (July) for U.S. GDP in 2015 is 2.5 percent, down from 3.1 percent just three months earlier. 

    In Japan annualized GDP was -1.2 percent in the second quarter and is expected to be negative again in the third, giving the world’s third largest economy its fourth recession in the five years since the financial crisis 

    The IMF forecast for Japan’s economy in 2015 is little better. It was revised down to 0.8 percent in the July release from 1.0 percent three months earlier.

    In the IMF's estimates only the European Monetary Union will prosper in 2015. By recent European standards, an increase to 1.5 percent GDP growth from 0.8 percent is prosperity. Since the end of the recession in June 2009, quarterly GDP in the EMU has averaged 0.22 percent.

    China's official GDP figure is calculated by the National Bureau of Statistics in Beijing. And, coming in above forecast in spite of negative trends in much of the economy, it has served to underline the disconnect between the GDP number and other economic measures.

    In September annual industrial production slipped to 5.7 percent from 6.1 percent in August, well below the 6.0 prediction. Except for the March rate of 5.6 percent it was the lowest pace of industrial production since September 2008. 

    China’s exports dropped 3.7 percent on the year to September. It was the third decline in a row and the seventh monthly drop this year. Imports fell 20.4 percent on the month from a year earlier and they have now fallen for eleven straight months.  

    Factory prices have been falling at the production level for 43 months.

    Despite a government pledge to support the economy and a raft of new infrastructure projects, the growth of annual fixed investment fell to 10.3 percent in September from 10.9 percent the prior month. It was the lowest rate of investment in fourteen years.

    Whatever the veracity of China's third quarter GDP figure, it is difficult to see how the mainland maintains even its  current pace of economic growth  when the rest of the world and the greater portion of global GDP is headed for a dismal fourth quarter.  

    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

    China joined the United States and Japan in relative decline in the third quarter leaving the European Monetary Union as the sole major economic bloc expecting stronger economic growth in 2015.

    Gross domestic production expansion in the world’s second largest economy dropped to a 6.9 percent annual rate, better than the 6.8 percent forecast, but still the slowest pace since the financial crisis. It was the second weakest quarterly average in more than 20 years. Since 1992 only the last quarter of 1999 at 6.7 percent has been slower. The Chinese economy expanded at 7.3 percent in 2014.

    In the United States third quarter GDP is expected to fall by more than half to 1.9 percent annually from 3.9 percent in second quarter. The Atlanta Fed's GDPNow calculation, one of the most accurate GDP estimates, is forecasting an annual growth rate of just 0.9 percent in the three months that ended in September.

    Even if the higher estimate proves correct, American GDP for the first three quarters in the will have fallen from 2.4 percent in 2014 to 2.1 percent. If the Atlanta estimate is accurate growth will have dropped to 1.8 percent. Few analysts are expecting a substantial improvement in the U.S. economy in the fourth quarter. 

    The latest International Monetary Fund (IMF) projection (July) for U.S. GDP in 2015 is 2.5 percent, down from 3.1 percent just three months earlier. 

    In Japan annualized GDP was -1.2 percent in the second quarter and is expected to be negative again in the third, giving the world’s third largest economy its fourth recession in the five years since the financial crisis 

    The IMF forecast for Japan’s economy in 2015 is little better. It was revised down to 0.8 percent in the July release from 1.0 percent three months earlier.

    In the IMF's estimates only the European Monetary Union will prosper in 2015. By recent European standards, an increase to 1.5 percent GDP growth from 0.8 percent is prosperity. Since the end of the recession in June 2009, quarterly GDP in the EMU has averaged 0.22 percent.

    China's official GDP figure is calculated by the National Bureau of Statistics in Beijing. And, coming in above forecast in spite of negative trends in much of the economy, it has only served to underline the disconnect between the GDP number and other economic measures.

    In September annual industrial production slipped to 5.7 percent from 6.1 percent in August, well below the 6.0 prediction. Except for the March rate of 5.6 percent it was the lowest pace of industrial production since September 2008. 

    China’s exports dropped 3.7 percent on the year to September. It was the third decline in a row and the seventh monthly drop this year. Imports fell 20.4 percent on the month from a year earlier and they have now fallen for eleven straight months.  

    Factory prices have been falling at the production level for 43 months.

    Despite a government pledge to support the economy and a raft of new infrastructure projects, the growth of annual fixed investment fell to 10.3 percent in September from 10.9 percent the prior month. It was the lowest rate of investment in fourteen years.

    Whatever the veracity of China's third quarter GDP figure, it is difficult to see how the mainland maintains even its  current pace of economic growth  when the rest of the world and the greater portion of global GDP is headed for a dismal fourth quarter.  

    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

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