Monday, January 24

China’s ownership-driven economic slowdown shows no signs of ending

China’s economy continued to slow down in November and car and home sales fell again as the housing market crisis progressed.

That’s the outlook for Bloomberg’s aggregate index of eight early indicators for this month. While the total number was unchanged, under the surface there was further deterioration in some of the real-time economic data.

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Strong export demand has helped partially offset the decline in ownership, and the latest shipping figures from South Korea, a benchmark for global trade, suggest another strong month for the sector. However, the pace of growth slowed and other high-frequency global trade data also suggests a decline in demand.

New export orders for smaller manufacturers in China increased in the month, according to a survey of more than 500 companies conducted by Standard Chartered Plc. Export-focused companies in the survey also said they expect faster sales, production and new orders in the next three months.

However, domestic demand was “moderate”, according to the survey, with the general conditions index improving slightly while the production indicator was unchanged.

“Business activity in the service sector has improved, while the performance of the manufacturing sector has softened further,” wrote Standard Chartered economists Hunter Chan and Shuang Ding in a report accompanying the survey.

“The current performance sub-index for manufacturing SMEs fell further to a nine-month low as production and new order growth slowed, despite a strong recovery in new export orders,” they said.

Iron rebar stocks were at their lowest level since mid-January this year as construction and steel production continue to slow. While a shortage of stocks is usually a good sign for the economy, signaling strong construction demand, the nation’s real estate turmoil in recent weeks has slowed construction activity and rattled metal markets.

This week, the central government again asked local governments to sell bonds faster and use the money to boost investment in infrastructure as a way to support growth. Iron ore prices have risen in recent days on expectations of a pickup in demand and steel production for the rest of the year, but local governments have struggled to find good projects to spend their money on. this year.

So far, the central bank and governments are tightly monitoring any large-scale stimulus or additional spending.

Inflation at factories showed no signs of abating this month, with a data set tracked by Bloomberg Economics rising to the highest level on record, despite government efforts to control rising coal prices.

The official producer price index in October rose at the fastest rate since July 1995 and, while increasing the profits of power producers and some other companies, it reduced the margins of other companies and also caused energy shortages in the early part of the year. anus.

Early indicators

Bloomberg Economics generates the overall activity reading by adding a three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices.

  • Top Land Stocks: CSI 300 index of A-share stocks listed in Shanghai or Shenzhen (until the market close on the 25th of the month).
  • Total home sales area in China’s four tier-one cities (Beijing, Shanghai, Guangzhou, and Shenzhen).
  • Inventory of steel rods, used for reinforcement in construction (in 10,000 metric tons). Falling inventory is a sign of growing demand.
  • Copper prices: spot price of refined copper in the Shanghai market (yuan / metric ton).
  • South Korean exports: South Korean exports in the first 20 days of each month (year-on-year change).
  • Factory Inflation Tracker: Bloomberg Economics created a tracker for Chinese producer prices (YoY).
  • Small and Medium Business Confidence: Standard Chartered Business Survey.
  • Passenger Car Sales: Monthly result calculated from the weekly average sales data published by the China Passenger Car Association.

© 2021 Bloomberg

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