In a troubling sign for the global economy, the Chinese Bureau of Statistics on Friday reported that the powerhouse economy grew at its slowest pace since early in 2009, near the height of the global recession. The agency said the Chinese economy, second largest in the world behind the US, grew 7.6 percent in the second quarter, down from a growth pace of 8.1 percent in the January to March period. While a 7.6 percent expansion clip sounds massive in the US, whose economic growth came in at just 2 percent in the second quarter. But China's economy has surged at an average of 10 percent for some thirty years.
Of course, China's government has intentionally tried to slow the economy in an attempt to cool inflation and control the real estate boom. To that end, officials enacted new housing regulations aimed at weakening sales. The plan was successful, with sales on the decline and inflation dropping as well, reaching a two-year low last month. Unfortunately, China's slowdown has come at a time when demand from international customers has declined, dragging the country's manufacturing sector down with it. The resulting deceleration in China's economy has exceeded expectations, prompting concern about the global economy, particularly with the US and the world's No. 3 economy Europe struggling.
The effect has started to ripple outward to the world's major multi-national corporations, with AMD lowering sales expectations earlier this week, as did Columbus, Indiana-based engine manufacturer Cummins. Both companies cited weaker Chinese demand as the primary factor behind the downgraded outlook. China's Baoshan steel company cited slipping demand for domestic infrastructure spending, a sentiment echoed by Dow-listed aluminum maker Alcoa in its latest earnings release. But for all the parts of China's economy that have slowed, the retail sector has not followed suit, a sign that China's plan to boost domestic demand is working.