With industrial production down and significantly less pressure on inflation the Chinese authorities are in a good position to throw some more fuel on the fire. The National Australia Bank reported that China’s Industrial Production for July rising by 9.2%yoy, down from 9.5% last month and below the median forecast of 9.7% – see graph below.
However this growth is not bad when you think of other primary producing countries. Furthermore the CPI rose by only 1.8% this year (July yoy) and down from 6.5% in 2011 so there is little pressure in this area.
The worry for China is their trade balance which has dipped. This was very disappointing export growth coming in with a rise of 1% over the past year, down from 11.3% last month and way below the median forecast of 8.0%. There was a big fall in exports to Europe, down by 16.2% over the past year (-1.1% in June). Exports to Italy are down by 35.8%. There was also a significant pull back in exports to the USA rising by 0.6%, down from 10.6% in June. Exports to the rest of Asia were better but have slowed everywhere. For Australia, exports rose by 8.5% yoy, down from 18.6% yoy last month. Meanwhile, imports slowed to 4.7%, from 6.3% last month and below the market forecast of 7%. Imports from Australia into China fell by 9.7%yoy, down from a rise of 1.7% for June.