More confusing signals from the Chinese economy that leave us none the wiser about its real state of health.
There are certain weaknesses, such as retail sales and cars but key production data showed a very solid month.
That’s especially so when figures out yesterday showed the country’s crude steel production was the highest in history last month 82.55 million tonnes and clearly ahead of the previous high of 81.24 million tonnes in July.
Confirming the uptick in output and perhaps new project spending, China’s October crude steel output was up 9.1% year on year from October’s figure was up from 80.85 million tonnes in September and 80.32 million tonnes in August.
The rise comes ahead of the expected capacity closures starting this week to try and reduce pollution in northern Chinese industrial cities, although the restrictions are far more flexible this winter than a year ago.
China’s 9-month, January-October crude steel output was up 6.4% on year to 782.5 million tonnes. That’s up from the 5.8% rise in August and confirms the continuing strength in steel demand and production.
And yet car sales fell last month to be down four months in a row. Steel, of course, is a major component of car making.
While there remain clear signs of a slowing pace of activity – weaker retail sales, especially those falling motor vehicles sales, weaker surveys of manufacturing and services activity, but imports and exports remain buoyant, production is a bit better, government spending is rising, but the picture from the important real estate sector also remains mixed.
On top of this, while industrial price inflation slows (despite higher oil prices), consumer price inflation remains stuck at moderate levels, without any strains showing.
Take the most positive news from the last dump of Chinese economic data for October – industrial production rose at an annual rate of 5.9% in October from 5.8% (a decade or more low) in September and while urban investment picked up surprisingly, perhaps due to higher government stimulus spending.
A negative yesterday was news that China’s retail sales growth slowed to 8.6% in October from a year earlier and from a 9.2% rate in September.
October’s was the slowest rate since May of this year and came on the 4th monthly fall in car sales in a row, weaker food prices and a slowing in real estate sales growth and investment.
Fixed-asset investment increased 5.7%, up from 5.4% in September (and multi-decade lows) in the 10 months through October.
The market had been looking at another slowing to an annual rate of 5.5% so the better than forecast outcome might also be due to higher central government stimulus spending.
In fact, it was the second month in a row that investment has perked up as the government updates more infrastructure spending deals approved and reports of easing controls on pollution, steel production and mining this winter.
Private sector fixed-asset investment rose 8.8% in January-October, compared with an increase of 8.7% in the first three quarters. Private investment accounts for about 60% of overall investment in China.
Besides the stellar steel production performance, data out yesterday showed a 4.4% rise in non-ferrous metal production in the 10 months to October to 44.8 million tonnes; China October coal output was up 8% on year to 305.1 million tonnes, and up 5.4% to 2.9 billion tonnes in the 10 months to October.
China’s October crude throughout was up 4.6% on year at 52.78 million tonnes and up a large 7.8% in the 10 months to October to 505.1 million tonnes.
China’s January to October coke (for steel) output was down 1% on year to 359.53 million tonnes, but up 4.5% in October to 36.6 million tonnes.
And perhaps the most telling figure of all – China’s October power generation was up 4.8% on year to 533 billion kilowatt-hours (kwh), while it was up 7.2% year on year in January-October to 5.58 trillion kwh. That statistic alone confirms that the economy is traveling OK.
In a commentary on the October economic data from Chin, the National Australia Bank’s highly respected monthly survey and commentary made the point that we have yet to see any real impact on China of the Trump tariffs.
“There remains no clear sign of negative impacts from US tariff measures, with China’s trade surplus expanding in October to US$34.0 billion (compared with US$31.3 billion previously). The overall value of both exports and imports was weaker month-on-month, in part reflecting the impact of the Golden Week holidays at the start of the month.
“In real terms, retail sales growth slowed further – down to 5.6% yoy (from 6.4% in September) – the slowest rate of growth since May 2003. The recent weakness in retail sales data has been in stark contrast to the strength in consumer confidence which, while off the peaks of early 2018, remains well above the levels seen over the past decade.
“New credit issuance was comparatively weak in October – with lending only around 60% of the total recorded in the same period last year. While the deleveraging program appeared to slow over the third quarter, the weakness in October credit suggests that any broad financial stimulus has yet to start.”