China sneezes, Fed gets cold feet

China is growing at a slower rate than a year ago and much slower than five years ago. But the widely-held view that growth has slumped in the past few months – which seems to have been a key factor in the Fed’s decision not to hike – is wide of the mark. In fact, a range of measures covering imports, output and spending suggest that conditions have stabilised and, in many cases, improved since the start of the year. To be fair, Fed Chairman Janet Yellenyesterday raised concern that China might slow further, which is certainly a risk worth considering. But given the evidence of stabilisation in recent data, and the fact that further monetary and fiscal support are in the pipeline, a more likely outturn is that China’s economy strengthens over the quarters ahead.