China’s Growth Shows Signs of Stability

Economic Blog
October 09, 2019

The United States and China have faced growing economic pressure to reach a trade deal. However, the stress may be fading for one party.

As shown in LPL Research’s Chart of the Day, China’s economy is exhibiting signs of stabilizing growth, according to composite leading indicators (CLI) data from the Organisation for Economic Co-operation and Development (OECD). The OECD’s assessment of the Chinese economy improved for a sixth straight month in August, while the OECD’s U.S. gauge continued to slip.

china-leadingindicators_1

To be sure, the OECD’s leading indicators gauge shows that both the United States and China could still exhibit below-trend growth (below 100).

In neither case is this a recession warning, though. The OECD CLIs are relative to long-term growth trends, and deviation from trend may represent different risks to the two economies. The OECD gauge for U.S. leading indicators has also fallen below 100 at three other points in this economic cycle, and the measure has rebounded each time.

The U.S.-China trade dispute is hitting a major milestone this week, as U.S. and China officials are slated to kick off face-to-face trade discussions in Washington, D.C. October 10. There are reports that both parties may consider a partial deal to avoid future tariffs, so there’s a chance we could see some important thawing in the relationship before the Asia-Pacific Economic Cooperation meeting in November.

“Trade tensions have had a meaningful impact on the global economy,” said LPL Financial Chief Investment Strategist John Lynch. “Any progress in talks this week could further relax tensions, allowing for global regions to recover from disruptions caused by trade over the past year.”

Of course, resolution of trade tensions is not simply about seeking efficient growth. There are also important issues around fair business dealings, intellectual property rights, national security issues, and even the relative merits of capitalist democracies and autocratic states. It’s unlikely that we will see every issue resolved in the near term, but we’re hopeful that a few concessions can help ease trade uncertainty and boost global demand.

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (Member FINRA/SIPC).  Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Member FINRA /SIPC

For Public Use | Tracking # 1-902931