Our China indicators are largely either directionless or weakening. However, three indicators we track have heightened our risk assessment for the region. Electricity usage has suddenly declined, and tax revenues have also taken a sudden turn lower. However, what concerns us most is shipping rates between China and its main trading partners is plummeting. The Shanghai Shipping Exchange freight index has fallen nearly 17% since mid-February and is now at levels not seen since 2011. The glut in global shipping capacity is already well known in the market so the sharp fall in rates cannot be explained solely by overly zealous shipping executives. In the context of directionless manufacturing indicators, falling electricity usage, and shrinking profits falling shipping rates points to poor demand conditions. Said differently, there is too much supply because China is demanding less as its economy might be stalling. (VIEW LINK)
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