China: its factories produce more but people buy less

WHAT HAPPENED

In August, Chinese factories increased their production by 5.2% year-on-year, but retail sales grew only 0.4%. Investment in construction fell 7.2% and urban unemployment rose to 5.3%.

WHY IT MATTERS

China produces more, but its families buy less and housing continues to decline. This first impacts stores, cars, restaurants, cement, and steel. It may also reduce its purchases of copper, soybeans, iron, and oil, putting pressure on their prices and on the countries that export them.

AND FOR YOUR PORTFOLIO

For a long-term portfolio, China's weakness may negatively affect companies and countries linked to raw materials. Brazil, Chile, and Peru are among the most exposed. Increased spending by the Chinese government could support those sectors later, but it is still a possibility, not a certainty.