China’s Premier Falls on His Sword
Words mean little on Fridays in the Wall Street Daily Nation.
Instead, we let pretty pictures do most of the talking for us. Each week, I select a handful of graphics to put important economic and investing news into perspective for you.
So I’ll try to shut up now…
Confirmed: China is Crumbling
That didn’t take long. Hours after I issued a warning about slowing economic growth in China, officials and new data validated it.
Speaking at a news conference on the final day of China’s yearly parliament, Premier Li Keqiang warned that the economy faces “severe challenges” in 2014.
Shortly after, three economic data releases provided proof of a slowdown in the world’s third-largest economy.
Fixed-asset investment, industrial production and retail sales figures all dropped in February compared to January.
Coincidental timing? I think not. Sounds more like an attempt to soften the blow ahead of the weak data. Especially since analysts expected all three economic measures to be in line with – or slightly above – January’s levels.
Either way, the implication is clear: “A storm is coming,” as Gao Yuan, an analyst at Haitong Securities in Shanghai, put it.
Indeed! Get out before it’s too late.
Speaking of warnings…
Earlier in the week, I told you to keep an eye out for Thursday’s retail sales report.
The blame-it-all-on-the-weather crowd needed sales to rebound to validate their existence. Color me surprised, because, well… they got it.
Headline sales increased 0.3% in February versus expectations of 0.2%.
However, the previous two months’ figures were revised downward significantly. So consumer consumption remains suppressed.
As we know, everyday Americans aren’t the only ones pinching pennies. So are businesses. Capital expenditure levels remain depressed, as well.
At some point, though, companies need to replace aging equipment, which promises to provide a bullish economic force. And we may be at that point now.
As Gluskin Sheff’s David Rosenberg reveals, when manufacturing capacity breaches 77%, which it just did, a “moderate capex growth cycle” follows.
Based on his estimates, it could be enough to boost GDP growth by 60 basis points.
Although that might not sound like a lot, it would represent a 23% improvement to current forecasts for U.S. GDP growth in 2014.
Clearly, this is a trend worth following. Closely.
A capital expenditure boom could lead to a profit boost for the companies on the receiving end of the spending. Needless to say, investors in those companies stand to benefit, too.
Rest assured, we’ll be hunting down specific opportunities as this situation unfolds.
March madness is about to get underway.
Here are some fun stats to keep in mind as you try to construct the perfect NCAA Tournament bracket for your office pool.
Newsflash: It ain’t going to happen. Unless you believe you’re the lucky 1 in 9,223,372,036,854,775,808 people.
Good luck trying, though.
That’s it for this week. Before you go, though, let us know what you think of this weekly column – or any of our recent work at Wall Street Daily – by going here.
Ahead of the tape,