Look for China’s first quarter GDP numbers tomorrow–here are my suggestions on how to figure out what they mean for growth in 2012
I think we can call this “restrained easing.”
Economists surveyed by Caixin estimate that China’s commercial banks lent 790 billion yuan ($115 billion) in March. That would be an increase from the 710 billion yuan lent by banks in February. The same group of economists estimates that money supply, as measured by M2, grew at an annual rate of 12.8% in March. That would be a slight drop from money supply growth in February.
Why are these estimates important right now? Because after inflation moved up to 3.6% in March from 3.2% in February, New York, Hong Kong and Shanghai got to fretting that, maybe, the higher inflation rate would constrain moves by the People’s Bank of China to expand the money supply to boost economic growth in China.
And we keep getting data that suggests the Chinese economy could use some stimulus. For example, export/import numbers out yesterday showed exports grew at an annual 8.9% in March—decent strength—but imports increased at just a 5.3% annual rate. That’s worrying since the usual reason for a slowing in China’s import growth is a decision by China’s manufacturers to cut back on their imports of raw materials because they see slower economic growth.
China reports first quarter GDP numbers tomorrow and economists are expecting to see the annual growth rate slow to 8.4% from 8.9% in the fourth quarter.
Until this weeks inflation-induced worries, the thinking was that a slowing growth rate like that would produce one or two cuts to bank reserve requirements—beginning in the next month or so–that would give China’s banks more money to lend.
The seasonal pattern is for manufacturing activity to rise in April in China. That would increase the need for capital—as well as add to demand for loans from China’s businesses.
Watch the new bank loans figure for April to see if that surge in lending materializes. It would be a sign that growth is either picking up or at least slowing less quickly as we approach the midpoint of the year. Optimists on China—and that includes your truly—think that China’s growth rate will bottom sometime around the middle of the year.
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I posted this on the JAM site and thought it might also be worth noting here…
I have seen so many sit on the sidelines and miss this last rally it’s unbelievable the level of fear on losing money over the short term. The ones who benefit from frequent trading are mostly the brokers that want to create fear and purport to have great insight that will protect your life savings from the ravages of the the market (while of course skimming 1-2% off the top).
I’ve read that our brains feel the pain of loss twice as acutely as we feel the joy of reward. These strong emotions are the enemy of investing in my opinion.
I came across this information from Mark Hulbert which I think is significant in my case (since I have 15+ years to retire)…
For the 2007-2009 bear market…
This unlucky investor was under water for just four and one-half years. I don’t know about you, but that strikes me as remarkably little time to completely recover from what some investors have referred to as one of the worst bear markets of all time.
Regarding the 1929 high and subsequent Great Depression:
Consider first the recovery time from the 1929 stock market crash and subsequent Great Depression. Because the Dow Jones Industrial Average didn’t surpass its 1929 high until 1954, many believe that the recovery time from that horrible era took 25 years.
In fact, though, the Dow paints a distorted picture, since it reflects only 30 stocks, doesn’t include dividends, and is not adjusted for the significant deflation that prevailed during much of the 1930s.
Upon taking all those factors into account, the truth is far less awful. According to Ibbotson Associates, a division of Morningstar, the inflation-adjusted total return index of the U.S. stock market was in late 1936 just as high as it was at its pre-crash peak in 1929. That was just a few months beyond the seven-year mark.
Consider the 1966-1982 period:
What about the infamous 1966-1982 period, over which the Dow went no where in nominal terms and was decimated in inflation-adjusted terms? Again the Dow paints a distorted picture.
According to Ibbotson, the inflation-adjusted total return index of the U.S. market was higher at the end of 1972 than it was in January 1966. And by mid 1983 that index was higher still — 10 and one-half years later.
In fact, that 10-and-one-half-year recovery time stands as the longest of any over the last century for the stock market as a whole. That’s a little more than double the time the market took to recover from the 2007-2009 bear market, but — once again — not so much longer as to suggest that recent experience is an exception to the rule.
I’m staying invested since I have the time to recover if I’m wrong, and I keep plowing cash into the market, and I’m no good at timing and never met anyone who is.