China's sputtering engine: August 2010

China's massive economic engine is slowing, but it's too early to know just how much.

Looking over the past decade, China's leading economic indicator (blue line) has rebounded from the massive slump of 2008, but it's falling again. Is this temporary or indicative of a longer trend?

Looking at the latest release of the OECD economic indicators for China, it appears that the massive jump in economic activity seen since the panicky period of late 2008 has drawn to a close.

China’s leading economic indicator has now declined for eight consecutive months with the latest August period showing a notable month-to-month decline of 0.21% bringing the latest level 0.69% below the level seen in August 2009.
Looking at past recessionary periods, it’s important to note that while China’s economy is clearly slowing, it will take some time to determine the severity.
We may be seeing the beginnings of an abrupt pullback of equal and opposite force to that of the government sponsored propping applied during 2009 or simply a slowing of a more durable overall recovery as was seen during the periods following the 1990s and early 2000s recessionary periods.

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