Fathom’s measure of economic activity in China, the China Momentum Indicator (CMI), posted just 4.4% in July, suggesting that growth is a third weaker than official data imply. Refresh the chart in your browser | Edit chart in Datastream Contrary to some, we do not believe that this slowdown reflects a strategic decision by China to rebalance the economy at a time when any negative impact on growth can be blamed on US trade sanctions. Indeed, it is happening despite of a lack of ‘rebalancing’. Recent measures of consumer appetite reinforce the message. Real retail sales growth — one of the ten

Fathom’s China Momentum Indicator 2.0, our preferred measure of the pace of economic activity in China, slowed to 4.6% in June, the weakest reading since August 2016. Gary Cohn, former chief economic advisor to Donald Trump, argues that this slowdown reflects a strategic decision by China to rebalance the economy at a time when any negative impact on growth can be blamed on US trade sanctions. However, we believe that China was slowing regardless. With the consumer share of total import demand on a downward trend since 2016, we also find little evidence to suggest that China is successfully rebalancing.

Fathom’s measure of China’s economic activity, its CMI 2.0, continued its descent in May, slowing to a 15-month low of 6.2%. Refresh the chart in your browser | Edit chart in Datastream Below the official estimate of GDP growth, which was 6.7% in the second quarter, the widening wedge between Fathom’s measure and the official measure is increasingly reminiscent of the gap that emerged in late 2013 – 2015. Back then, just as they are now, the Chinese authorities used monetary stimulus to support short-term growth, repeatedly cutting banks’ reserve ratio requirements while denying that the economy was materially slowing. Refresh the