Trump claims trade war is working as China's growth hits 27-year low - business live

Graeme Wearden

from Economics | The Guardian on 2019-07-15 18:11 (#4K5PS)

Rolling coverage of the latest economic and financial news, including reaction to the latest Chinese GDP report

Latest: Trump says trade war is hurting China

Earlier:

7.11pm BST

If you're just tuning in, here's our news story on the Chinese growth figures.... and president Trump's response.

Donald Trump has claimed that his tariff battle with China is working after official data from Beijing showed growth in the world's second biggest economy dropping to its slowest pace since 1992.

The US president said the impact of his protectionist measures had been to cause an exodus of companies from China, as Beijing announced that its annual rate of expansion had slowed from 6.4% to 6.2% in the second quarter of 2019.

In tweets that were immediately challenged by economists, Trump said his tough action had forced China's leaders to the negotiating table.

6.45pm BST

European stock markets ended the day higher, blown upwards by hopes of fresh Chinese stimulus measure to prop up growth.

After a brief stint in the red the FTSE has powered higher on Monday as risk on dominated. Better than expected results from Citigroup boosting Wall Street and the prospect of stimulus for China lifted the FTSE at the start of the week.

Chinese GDP data showed that the economy grew by 6.2% its lowest level of growth in almost a decade. However, rather than depressing the market, hopes of stimulus for the world's second largest economy have boosted risk appetite, lifting demand for riskier assets such as stocks. Just as we are seeing with the US, the prospect of easing financial conditions is not being interpreted as bad news for stocks. Instead the prospect of cheaper borrowing in the case of the Fed and support from the PBOC is giving investors plenty of confidence to buy in.

6.40pm BST

Donald Trump may feel vindicated by China's economic problems, but Americans won't be cheering if the US economy suffers the consequence.

Few countries would be fully insulated from a Chinese economic hard-landing, and America would certainly feel consequences - including less demand for US goods and financial volatility if emerging markets were also dragged down.

China's economy is slowing (deeper than the official number indicates) mainly due to long-standing domestic issues (overinvestment and bad debt) though trade frictions don't help. US leaders childishly cheering this on, to vindicate their own trade policies, is playing with fire.

So many ways in which an uncoordinated China slowdown - especially one where China retrenches and tries to insulate itself from foreign pressure - could blow back in US face. Yet some US policy makers talk gleefully about "taking down" China's economy. Foolish.

China's economy needs to slow, but also needs to change gears. Unfortunately it's heading - and now being driven - in the opposite direction. Looks more and more like it's digging in to try to weather the storm. Plenty of foolish choices on both sides of this clash.

South Korea and Singapore GDP both contracted in latest quarters, while China's total imports down -7.3% - all suggesting China's slowdown is steeper than told. Due to trade tensions, US exports to China, down -30%, are bearing the brunt.

3.02pm BST

Time for a quick recap:

Alan Turing's pioneering work in mathematics and computer science played a crucial part in ending the Second World War. It is only fitting that we remember his legacy and the brilliant contribution LGBT people have made to our country on the new 50 note. https://t.co/tFsVdvcKNp

2.34pm BST

Boom! America's stock market has hit a new all-time high at the start of trading in New York.

The S&P 500 index and the Dow Jones industrial average have both touched fresh records, adding to last week's gains.

2.12pm BST

Here's Reuters take on those Trump trade war tweets:

U.S. President Donald Trump on Monday pointed to slowing economic growth in China amid restarted trade talks, saying U.S. tariffs were having "a major effect" and warning that "possibly much more" were to come.

Growth data released earlier on Monday showed the world's second-largest economy had slowed to 6.2% in the second quarter, its weakest pace in at least 27 years amid ongoing trade pressure from the United States.

1.57pm BST

America's National Association of Manufacturers points out that the Empire manufacturing survey isn't THAT good.

Factories may be growing again, at least in and around New York, but new orders are still down and employment level fell again.

New York Fed: Manufacturers activity rebounded in July after contracting in June for the first time since October 2016. The headline index rose from -8.6 in June to 4.3 in July, with shipments and the average workweek expanding very modestly for the month. pic.twitter.com/WrMJ9YE8Wi

Nonetheless, new orders and employment remained negative, with hiring declining for the second straight month and with its weakest reading since January 2016.

At the same time, respondents to the Empire State Manufacturing Survey remain optimistic in their outlook for the next six months. Half of those completing the survey said that they anticipate higher sales over the coming months.

1.50pm BST

Economists say we shouldn't get too excited by the Empire manufacturing report.

The pick-up in growth is encouraging, but US factories will still be hurt by a trade war.

$USD. Empire manufacturing rebounded somewhat more than expected after the big crash in June. It's early days yet, but a provides s modestly positive read-through for ISM manufacturing for the start of Q3. #exhale pic.twitter.com/U6pmNJZVH6

Empire bounce looks like a recovery from the excessive negativity in June (when the survey was taken during a wildcat tariff threat from the President), can't really tell if there's a more persistent uptick going on.

The New York Empire manufacturing survey has bounced back more strongly than expected in the wake of the US-China trade truce. However it has only made back half of May's record drop so the manufacturing sector remains vulnerable, especially if trade talks hit a brick wall.

1.40pm BST

Newsflash: Factories in the New York region have strengthened this month, after the US and China agreed to restart trade talks.

The Empire State manufacturing index, just released the, has risen to 4.3 in July, up from -8.6 in June. That's the biggest turnaround in two years.

NY FED'S EMPIRE STATE CURRENT BUSINESS CONDITIONS INDEX +4.3 IN JULY VS -8.6 IN JUNE pic.twitter.com/8YEYL4jdRw

#UnitedStates NY Empire State Manufacturing Index at 4.30 https://t.co/OuXXb5tAs8 pic.twitter.com/E5K5sz4v6t

1.11pm BST

Adrian Lowcock, head of personal investing at financial platform Willis Owen, agrees that the trade war is hurting China's economy.

But, with growth at a 27-year low, Lowcock also believes China can take action if the slowdown worsens.

"The Chinese GDP data shows that the trade war with the US is having an effect, as exports slowed. Although the US and China have announced they are re-starting negotiations it doesn't look like a resolution will come quick enough for any imminent turnaround in the economic data.

"There are, however, some positives. The weaker economic data still shows an economy growing above 6% per annum, with domestic consumption continuing to grow. At the same time, China can intervene with further stimulus should the government become concerned.

12.41pm BST

Reaction to president Trump's trade war tweets range from the educational to the bewildered:

US Q2 GDP growth has slowed as well well below 2%.https://t.co/pOTeH2CPFR

Sorry to break it to you but tariffs are paid by the importer - US tax payers in this instance.

The US's trade deficit with the rest of the world reached a 10-year high in 2018. The trade gap also widened with Chinahttps://t.co/8CdxE1qhzI

WTF is he on about? https://t.co/10tdnAyXlv

12.14pm BST

Just in: Donald Trump has claimed that the slowdown in China's economy is due to the trade war he began last year.

In a couple of factually questionable tweets, the president claims that companies are leaving China to dodge his tariffs, and that those tariffs are also bringing money into the US.

China's 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal....

....with the U.S., and wishes it had not broken the original deal in the first place. In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come. These Tariffs are paid for by China devaluing & pumping, not by the U.S. taxpayer!

12.05pm BST

While Alan Turing is an excellent choice to be honoured on a UK banknote, it's a blow to campaigners who hoped the Bank of England would recognise an ethnic minority citizen, for the first time ever.

The Banknotes of Colour campaign say they were ignored by the Bank, even though it claims to take diversity and equality "very seriously".

Our campaign exhausted every avenue. We garnered more than 150,000 petition signatures. On December 16 2018, our campaign secured the support of celebrities such as David Oyelowo, Meera Syal and Gemma Chan, who signed a Sunday Times letter alongside 220 people in public life.

On February this year, a letter signed by 100 cross-party politicians was sent by Helen Grant MP to the governor. On April 2, she presented a private members bill in parliament.

Have you really just tweeted that when BAME campaigners have tried to approach the Bank and the @FT have published our letter? @omaromalleykhan @sundersays @ppvernon @MendoncaPen @sunnysingh_n6 @aak1880 @Voa1234

I am calling the Bank of England now to ask for clarification and why we have been ignored repeatedly and we not told of the date @omaromalleykhan @sundersays @susiesymes1 @ppvernon @MendoncaPen @Samsmethers @HelenGrantMP

On the phone to the @bankofengland - Comms team did not answer - spoke to Tom in the @bankofengland's Engagement & Enquiries Team who said I should write to them. Gave me STD legalese that Bank takes into account all diversity. Again did not understand issues of racial injustice

12.00pm BST

Here's the full shortlist of scientists considered for the 50 note, drawn from 989 different scientists who were nominated by the public:

11.51am BST

The news that Alan Turing, the father of modern computing, will grace the new 50 is being well-received.

Here's Conservative MP Guy Opperman:

Alan Turing a great choice for new 50 banknote https://t.co/bqjpfG1kHj

Alan Turing to be face of new 50 note
Absolutely delighted by this news. Alan Turing was a national hero and treasure who suffered disgusting prejudice for his sexuality. It's absolutely right we celebrate him for who he was. https://t.co/Eqm436EbjB

This is terrific. Great decision by Bank of England to honour Alan Turing. https://t.co/ddNopbhKRj

Yes indeed. Ada Lovelace was on our shortlist. As was Hawking, Hodgkin, Rutherford, Ramanujan, Anning, Sanger, Babbage, the Herschels, Dirac, Maxwell and Franklin. It was an incredibly difficult choice but Turing stood out on all levels.

Head of Deep Mind @demishassabis says the premature death of Alan Turing following prosecution for homosexual acts and enforced chemical castration was "one of the greatest tragedies of the last century" and continues to be a lesson for the UK to learn. #Turing50 @bankofengland pic.twitter.com/fEbf1M9TJo

11.31am BST

The new 50 will feature one of Alan Turing's most famous quotes, given to The Times in 1949 about the opportunities of computing:

"This is only a foretaste of what is to come, and only the shadow of what is going to be."

It will also reference one of Turing's academic papers, "On Computable Numbers, with an application to the Entscheidungsproblem", in which he essentially envisages computing machines and shows there are indeed unsolvable problems - in other words, propositions that cannot be deemed provable or not based only on rules and statements of fact.

The 50 note will carry a Turing quote that reads: "This is only a foretaste of what is to come, and only the shadow of what is going to be." Prescient

11.19am BST

Bank of England Governor Mark Carney describes Turing as "a giant on whose shoulders so many now stand." pic.twitter.com/HyBvBeUEWW

11.17am BST

Newsflash: Alan Turing, the scientist famous for helping to crack the wartime Enigma code and pioneering the modern computer, has been chosen to appear on the Bank of England's new 50 note.

The mathematician was chosen from a list of almost 1,000 scientists in a decision that recognised both his role in fending off the threat of German U-boats in the Battle of Atlantic and the impact of his postwar persecution for homosexuality.

11.05am BST

Mining stocks are among the risers on the London stock exchange this morning, on hopes that China's economy will perk up.

FxPro's analyst team explain:

"The Chinese GDP came out better than expected, somewhat reducing concerns about the growth rate of the second largest world economy. In addition to quarterly data which marked an increase by 1.6%, the markets reacted to a spike in industrial production. In June, the annual growth accelerated from 5% to 6.3%. Since China is the largest raw materials importer, strong industrial figures are setting the demand for the commodities. As a result, we see an increase in purchases of mining companies, as well as Australian and New Zealand dollars, which are in demand in the hope of increasing exports to China.

At the same time, in a more global context, one cannot lose sight of the fact that the current data remains very weak. The annual growth rate of the economy has slowed to a minimum level over the past 27 years, and the current surge in production has been stimulated by the Chinese government. Under these conditions, market growth momentum can be very unsustainable if no further good news follows."

11.00am BST

Heads-up: In 15 minutes we discover which pioneering scientist is being honoured as the face of the Bank of England's new 50 note.

Who's going to be on the new 50 note? Find out here at 11:15am #ThinkScience https://t.co/1WOiN99V1A pic.twitter.com/ql8rTZcees

10.47am BST

China's stock market ended the day up 0.4%, as traders anticipated fresh government stimulus measures to spur growth.

There was also relief that the GDP report wasn't worse, and that retail sales and industrial output growth accelerated.

the world is mixed following china slowdown - rate cut optimism still is seen pic.twitter.com/O6KMm7braN

10.28am BST

Because China's GDP data only dates back to 1992, we can only say for certain that today's data is the worst in at least 27 years.

It's probably the worst in around 30 years, as the FT explains:

Chinese economic growth plummeted in the aftermath of the 1989 crackdown on pro-democracy protests in Tiananmen Square, but recovered and began its long period of expansion after Deng Xiaoping's "southern tour" of 1992.

The real economy also slowed sharply during the Asian financial crisis of the late 1990s and in the aftermath of the global financial crisis of 2008.

10.10am BST

Over in Berlin, the government has warned that Germany's economy is under pressure.

In its monthly report, the economy ministry warned that industrial activity is subdued, partly due to to weak global demand. It also singled out trade conflicts, geopolitical tensions and Brexit as key "downward risks".

"After what is shaping up to be a subdued development in the second quarter, the forces of economic upswing could become more prominent again if the external environment settles."

German Economy Ministry: Industrial Activity Remains Sluggish, Headwinds From Foreign Demand Still Being Felt

German Economy Ministry: Current Data Point To Slower Growth In Service Sector

9.51am BST

Data firm Markit has spotted that China's business leaders are unusually pessimistic about their prospects:

Optimism levels at Chinese businesses have fallen to a record low in the latest IHS Markit Business Outlook survey. Profits are broadly expected to remain flat, as firms also look to slow down hiring activity. Read more here: https://t.co/L0IUXeDyT8 pic.twitter.com/xt0XP5mr0L

@IHSMarkitPMI Global Business Outlook survey shows worldwide optimism for business activity and corporate profits has fallen to its lowest since the global financial crisis, accompanied by reduced expectations for employment and investment spending. https://t.co/KyFO77Fogm pic.twitter.com/r5fi9uqOvW

9.39am BST

Graham Spooner, investment research analyst at The Share Centre, says Sports Direct investors are understandably spooked by the delay to its results.

"It was no surprise to see Sports Direct's shares drop sharply in response to this news, near to a seven-year low. Whenever a company announces a delay to reporting results within just a few days of when they are due the market naturally becomes concerned. Investors should note that part of this is due to a review of processes carried out by the company's auditors, Grant Thornton, but the decision to buy House of Fraser rests entirely on Sports Direct's management. That purchase was just one of several over the past year, including Evans Cycles, and trading on the high street has been difficult for many retailers.

Until the company publishes its results and investors can see the situation for themselves they should be very wary."

9.34am BST

In the City, shares in retail group Sports Direct have plunged over 10% after it announced its annual results, due on Thursday, will be delayed.

9.18am BST

China's growth report may reassure investors that the global economic outlook isn't as bad as feared, says Kit Juckes of Socii(C)ti(C) Gi(C)ni(C)rale.

He's encouraged by the pick-up in retail spending and factory production in June:

Is it really that bad? England won the cricket world cup, a Frenchman's in yellow in the Tour de France, Wimbledon managed a fortnight free of rain delays and the Chinese economy is recovering from the weakness that it suffered at the start of the year.

There's a distinct risk that the theme for markets this week will be 'it's not that bad', particularly in London. China's barrage of economic data this morning may show real GDP growth continuing its gradual and suspiciously steady pace of slowdown continuing (6.2% y/y in Q2) but there were clear accelerations in retail sales, industrial production and capital spending.

9.05am BST

GDP data should always be viewed with some scepticism, as they're a blunt and incomplete measure of how a country is faring.

This has spurred New Zealand to use wellbeing as a better measure, as it tries to tackle wealth inequality, homelessness, child poverty and mental health issues.

"Since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics," said the authors led by Chang-Tai Hsieh, economist at the University of Chicago Booth School of Business and research associate at the US National Bureau of Economic Research.

For years, the sum of China's provincial GDP has exceeded the national figure, a clear sign of statistical inflation at the local level. The National Bureau of Statistics (NBS) has previously acknowledged that "some local statistics are falsified", and in 2017 the central government accused three provinces in China's north-east rust belt of fabricating data.

8.36am BST

Investors in Europe are taking the China slowdown in their stride.

The London stock market has opened a little higher, with the FTSE 100 index up 8 points. There are stronger gains in other countries, with Germany's DAX gaining 0.8%.

Bad news = good news. Relatively lacklustre growth in China has the market baying for more stimulus. To be fair, despite the headline Q2 GDP number slipping to a 30-year low at 6.2%, there were some signs of encouragement. Industrial production rose 6.3% in June, an improvement on the 5% growth in May. Retail sales also beat forecasts.

Most of the recent softness seems trade-related, with exports having dipped 1.3%.

8.23am BST

The Chinese government is likely to do whatever it takes to keep its growth rate above 6%, says Hussein Sayed, Chief Market Strategist at FXTM:

Today China reported its slowest rate of quarterly economic expansion in almost three decades. The economy grew 6.2% in Q2, in line with markets' expectations, but 0.2% below Q1 growth.

Policymakers will likely defend the 6% growth levels over the second half of 2019 by escalating stimulus measures, whether it's in the shape of fiscal or monetary. On the bright side, industrial output grew 6.3% in June and retail sales easily beat market expectations coming at 9.8%. Whether this trend will be sustained remains to be seen, but so far, the data clearly reflects that China is not headed towards a hard landing.

8.12am BST

Although China's growth rate has slowed in recent quarters, there are signs that its economy may be picking up.

Industrial production rose by 6.3% year-on-year in June, up from 5% in May. Retail sales growth sizzled too - up 9.8% from 8.6%.

Small uptick in China's investment spending growth in June (YTD yoy) and big uptick in retail spending growth (yoy in blue). Industrial production accelerated to 6.3% from 5.0% yoy (flat at 6.0% YTD). June pushed Q2 GDP to 1.6% QoQ (1.4% in Q1) but yoy slipped to 6.3% yoy. pic.twitter.com/QTb1MKFeJa

7.59am BST

This charts confirms that China's growth rate is now the weakest since modern records began in the early 1990s.

The trade war with America has pulled it below its slump after 2008 financial crisis:

7.45am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

"Economic conditions are still severe both at home and abroad, global economic growth is slowing down and the external instabilities and uncertainties are increasing.

"The economy is under new downward pressure"

"Uncertainty caused by the US-China trade war was an important factor and we think this will persist, despite the recent tariff truce.

"Businesses remain skeptical that the two countries will reach a broader trade agreement and recognise that trade tensions may escalate again."

The China GDP data was very much in line with consensus confirming the markets view that the economy continues to slow, and while GDP touched 27 years low in Q2, the on consensus print does lessen the market fears that China's economy is headed for a hard landing.

As such risk assets will respond favourably but it's hard to escape the economic realities that the US-China trade war is having on global economies.

Global mkts edging higher, heading into busy week for macro & micro narratives. Bouncing after China's Jun activity data was strong upside surprise while China 2Q GDP in line. Bonds unchg after last weeks selloff w/US 10y at 2.13%, Bunds at -0.21%. Bitcoin sharply lower at $10.1k pic.twitter.com/CHG7V5IsXv

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title	Economics \| The Guardian
Feed Link	https://www.theguardian.com/business/economics
Feed Copyright	Guardian News & Media Limited or its affiliated companies. All rights reserved. 2025