China reported year-over-year inflation last night at just 0.1%, 0.2% lower than expectations. Clearly, China’s reopening is not creating price pressures, which brings the strength of the reopening into question.
Recently, we saw a fairly significant drop in China’s PMIs—all of them well below 50—indicating again a lack of economic strength.
We have found that copper is a pretty good leading indicator for China’s GDP, and the relationship is starting to fray. Just as copper prices signaled an upturn in China’s GDP last summer, it appears that copper is now telegraphing a slowdown in China’s GDP expectations for this year.