Assessing China's youth unemployment with job posting data: Is deflation on the horizon? — Charts of the Week

Understand China's current economic state in 15 charts

"If you're going through hell, keep going.” —— Winston Churchill

China's economic data for July are signaling a deflationary trend. The Consumer Price Index (CPI) declined by 0.3%, its first negative move since 2022, while the Producer Price Index (PPI) saw a 4.4% drop, marking its tenth consecutive fall. Additionally, both retail growth and total social financing fell below expectations. Notably, the widening gap between the year-on-year increase in M2 and M1 money supply in July provides further indication of the deteriorating economic activity.

Notes: The M1-M2 growth disparity serves as a key indicator of non-financial enterprise activity. M1 is mainly cash and current enterprise deposits, while M2 adds residents' savings and time deposits. A widening gap, with M2 growing faster, signals a shift to time deposits, hinting at reduced confidence in business investment.

The recent data does not inspire confidence in a swift rebound. Further compounding the uncertainty, Beijing has chosen to cease reporting youth unemployment figures starting in July, making it even more challenging to assess the state of the employment landscape.

On August 15, the People’s Bank of China (PBOC) made an unexpected adjustment to key benchmark rates: cutting the MLF by 15bps and the 7-day repo rate by 10bps. The market also anticipates that a cut in reserve requirements will follow. The offshore Yuan exchange rate has weakened to a nine-month low following the rate cuts. In a contrasting trend, the securities and real estate sectors are showing an upward movement, propelled by the new economic stimuli.

As conditions deteriorate and short-term volatility intensifies, it's natural to feel alarmed. During such times, prioritizing a clear understanding over emotional responses becomes even more essential.

In today’s charts of the week series, we aim to delve deeper into pivotal aspects of China’s current economic landscape in 15 charts:

• Decompose the CPI number to understand whether China has truly entered deflation

• Demystify the youth unemployment and overall employment outlook using our job posting data

• Gauge whether the stimulus has made a material impact on the tepid real estate market using our data on home listings and transactions

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