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Steel Output Surge Saves Chinese Economy Despite Credit Impulse Collapse

Tuesday, March 13, 2018 21:09
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Despite all the discontinuities that the lunar new year causes in China’s macro data, the global synchronous recovery narrative is fading fast, but while retail sales missed, China’s Industrial Production surged in February (thanks to Steel production up 5.9% YoY).

China’s macro data has been disappointing for a couple of months…

And as Bloomberg’s Enda Curran notes, it’s China data day, but with a catch.

Today’s numbers will cover a period when the economy more or less shut down for the annual New Year holidays which means it’s a tricky time of the year for gauging the economy’s true strength. We’ll have to wait for the March and April numbers to get a better handle.  

And so what did the data look like…

  • Retail Sales YTD YoY MISS +9.7% vs 9.8% exp vs 10.2% prior
  • Industrial Production YTD YoY HUGE BEAT +7.2% vs 6.2% exp vs 6.6% prior
  • Fixed Asset Investment YTD YoY HUGE BEAT +7.9% vs 7.0% exp vs 7.2% prior

Amid all the tariffs, it seems Steel saved China…

  • China Jan.-Feb. Steel Product Output Rises 4.6% to 159.03M Tons
  • China Jan.-Feb. Crude Steel Output Rises 5.9% to 136.82M Tons

And Iron Ore inventories are surging…

Iris Pang at ING has some interesting observations on industrial production. Even though factories were closed, the tech boom  boosted output. Here’s some numbers:

“That growth will probably come from high-tech sectors, including industrial robots (+68.1 percent in 2017), new energy cars (+51.1 percent) and integrated circuits (+18.2 percent).

The cold winter is also likely to increase production of electricity. These areas will probably cushion the loss of production from capacity-cuts in cement, coke and crude oil.”

The figures do somewhat cut against the overarching narrative of a slowdown in the old-industrial drivers and a switch to consumption.

Meanwhile, Chinese stocks managed to scramble back into the green for the year after the lunar new year’s celebration, but are rolling over once again…

As foreign investors fled in February…

All of which happening as the lagged impact of the collapse of China’s credit impulse filters through…


And don’t expect it to resurge anytime soon as Xi – now emperor for life – cracks down on leverage and debt across society (for now).

Of course, as Bloomberg’s Chris Anstey concludes, from a financial-market perspective, it’s been some time since investors agonized over Chinese indicators. Most are comfortable that the hard-landing fears are in the rear-view mirror now, and have become accustomed to the idea that China is in a gradual transition from focus on quantity of growth to quality.

Of course, that complcency is there until something (like Anbang) goes boom…


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