China Economy May Be Bottoming Out, Private Gauges Show

(Bloomberg) -- China’s growth may be bottoming out as big data indicators of industrial output and the property market improve in December, private gauges show.

While official data showed industrial production and retail sales weakening last month, U.S.-based DeepMacro LLC’s gauges for this month look a “bit better,” it said in a Dec. 17 report. That indicates market bearishness toward China is overdone, said the firm, which provides big data and machine-learning investment strategies.

“Things can start to get better from here,” it says. “We are cautiously optimistic that Chinese growth is reaching a bottom.”

A measure of industrial output based largely on pollution data showed a pickup in the first three weeks of December from a year earlier while real estate prices in selected cities and sales in the biggest cities strengthened, DeepMacro’s gauges show.

Above-trend cost pressures also support its view that the economy may be bottoming. Despite official readings showing inflation eased a tad in November, DeepMacro’s gauge signals moderate price pressures.

“Above-trend inflation has persisted for almost two years now,” it said. “In contrast to the prior period when a deflating economy impaired debt servicing capacity, inflation is now comfortably positive. This is a big change from the last episode of China weakness in 2015/16.”

DeepMacro’s indicator of sentiment toward the yuan, gleaned from posts on China’s Twitter-like Weibo social media platform, also has improved in recent months. This is another nudge in support of its more positive outlook, because compared to previous periods of economic weakness there is much less capital outflow pressure built up in the system, it said.

To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Karthikeyan Sundaram

©2018 Bloomberg L.P.

With assistance from Bloomberg