China's growth slows and takes world equity markets with it

Slower long-term growth in China is probably an economic reality.

Robert Johnson, CFA 15 March, 2014 | 9:47PM
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Last week's cheery reaction to an above-expectations jobs report didn't last long. Equity markets suffered through a bad week with slowing growth in China and a continued tense situation in Ukraine. The S&P 500 fell 2% for the week. The iShares Emerging Market ETF EEM fell a more notable 2.8%. Bonds reacted to news of economic slowing as one might expect, with yields on the 10-year U.S. Treasury bond falling from 2.79% to 2.65%, reversing last week's shellacking. Production and retail news confirmed ongoing softening in China after last week's export data fell off a cliff and ongoing weakening in the purchasing manager surveys.

Other than a wide variety of weaker stats from China, the U.S. data flow was close to nonexistent. The normally important monthly retail sales report appeared to shake off some of the weather-related blues in February. I use the word "appeared" because a closer analysis of the data shows a sustained weakness in consumer spending on retail goods on a year-over-year basis. Worse, revisions to previous months of the same report suggest that the third revision to fourth-quarter GDP is more likely to be down than up.

News from some of the less important indicators was mixed. Small-business sentiment was down, and producer prices were lower, suggesting a soft economy. On the employment front, job openings showed a small increase, and initial unemployment claims fell, suggesting that last week's favoUrable jobs report was not a fluke.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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