Real estate is back on centre stage in the Chinese economy, despite a set of weak retail sales and production data for January and February at the weekend.
The production data was weak because of seasonal factors in January and February associated with the distortions caused by where the Lunar New Year holiday fell (on February 8 this year against February 19 last year).
But along with the poor manufacturing activity reports at the start of the month and the weak trade and import data, the latest figures paint a picture of an economy struggling to maintain momentum.
The miss on retail sales was perhaps the biggest blow – they had been rising solidly for most of 2015, but hit a bit of an air pocket in December and in January – February.
Investment rose 10.2% over the first two months of the year compared with the same period in 2015.
While up on forecasts, it was still well down on the 11.1% seen in the same period of 2015.
But this seems to have been driven by a pickup in real estate investment and development following stronger sales.
Real estate investment lifted to a rate of 3% in January and February, from a year earlier compared with a 1% throughout 2015.
The value of property sales in the first two months of this year surged 43.6% from a year earlier, while property sales in some mid-sized cities doubled.
Prices for February won’t be released until later this week, but earlier data showed by rises in Shanghai, Beijing and some cities in Guangdong province in recent months.
Fixed-asset investment in non-rural areas of China climbed 10.0% last year.
It was a good thing that real estate investment is rising because there was little else in the monthly figures to cheer markets.
Industrial output rose 5.4% from a year earlier in January and February, according to the National Bureau of Statistics, compared with the 5.6% market estimate and 5.9% last December.
For the full year of 2015, industrial output grew 6.1%, slower than an increase of 8.3% in 2014. Production for January – February last year was up 6.8%, so the slow down over the past year is palpable.
Chinese crude steel production – a key indicator for Australia – fell 5.7% in January-to-February to 121.07 million tonnes, from the first two months of 2015 which production totalled 130.526 million tonnes.
Total steel products (includes from electric arc furnaces) output fell 2.1% to 162.28 million tonnes.
Annual steel output dropped 2.3% to 804 million tonnes in 2015, the first contraction since 1981. And aluminium metal production dropped 7.7% in the first two months of the year, according to Bloomberg.
Meanwhile retail sales rose 10.2% in January – February from the same two months of 2015, slower than the 11% rise forecast by the market and 11.1% in December (and 11.2% in November of last year)
Retail sales rose 10.7% in 2015, compared with growth of 12.0% in 2014. They rose 10.7% in January and February of last year.
Economists said that with Lunar New Year in February, retail sales should have been stronger, especially with food prices up solidly in the month (which helped boost inflation to 2.3%)
Speaking at a briefing just before the data’s release yesterday, People’s Bank of China Governor Zhou Xiaochuan tried to maintain an aura of calm about the economy, saying that the government will be able to meet its target of at least 6.5 percent growth over the next five years.
“Excessive monetary policy stimulus isn’t necessary to achieve the target,” Zhou said, reiterating past comments that monetary policy is prudent with a slight easing bias. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy,” Bloomberg reported. More hope than promise?
