Are the tentative signs of a slowing in Chinese economic activity (seen in the monthly production and trade data for March in particular) more than just a one off blip?
The day after investment data for the first quarter showed a surprise upturn in activity in China’s property and construction sector, house price figures for the country’s 70 major cities have revealed a slowing in growth in house prices.
The economy grew at a solid 6.8% annual rate in the quarter and by 1.4% from the December quarter, when GDP was up 1.6% from the three months to September. Nothing wrong there.
But monthly figures for March showed investment and production were weaker to mixed. Oil and steel production were stronger than expected, power generation rose, but cement output fell.
On Tuesday night the country’s central bank dropped the reserve ratio by a full percentage point to take effect from April 25, saying that the cut was being made to reduce funding costs for the targeted banks and in turn help ease conditions for businesses and individuals.
The PBOC said the reduction in funds required to be parked with it will apply to large commercial banks, joint-stock banks, city commercial banks, rural commercial banks, and foreign lenders. It is intended to “improve the liquidity structure,” it said.
About 900 billion yuan ($US143 billion) of outstanding medium-term lending facility loans will be repaid on the day of the cut and another 400 billion yuan will be released, the People’s Bank (PBOC) said in a statement. That’s a total of around $US200 billion being pumped into banks and the money markets from next Wednesday.
Then yesterday, the surprise weakening in price growth for new housing prices in the 70 major cities provided another talking point for analysts.
Prices grew at the slowest pace in two years in March as property sales softened and bearish analysts reckon this is a sign of expectations of a broader slowdown heading into the second quarter.
Reuters reported that the cost of new housing in 70 major cities rose 4.9% in March, according to a weighted average based on data from China’s National Bureau of Statistics.
That was down from growth of 5.2% in February and the slowest growth for two years (since March 2016).
In month-on-month terms price growth picked up slightly, rising 0.4% on average compared to a 0.2% rise in February which was impacted by the Lunary new Year holiday when activity slows.
New house prices fell compared to a year ago in 10 cities, including Shenzhen and Nanjing, and were unchanged in five.
Prices in the remaining 55 rose, with top-tier cities like Beijing and Shanghai, seeing the tiniest of rises of 0.1% and 0.2% respectively.
The lacklustre price growth in March tracks a decline in sales growth, which dipped almost 5 percentage points to register a year-on-year rise of 10.4 per cent in value terms last month.
Sales growth also softened when measured by floor space, from 4.1% in February to 3.6% in March (but the investment data showed a rise.
Real estate investment in China rose 10.4% in the first quarter from the first three months of 2017 as the pace of new construction sped up. but at the same time property sales slowed in the face of continuing moves by governments to cool demand and activity.
Investment growth accelerated from 9.9% in the first two months of this year and the National Bureau of Statistics it was a marked quickening from 9.1% in the first quarter of 2017,
New construction starts measured by floor area were up 9.7% in the first three months of the year, compared with a 2.9% rise in first two months, meaning there was a rapid surge in activity in March.
Property sales measured by floor area grew 3.6% in January-March from the same period a year earlier, down from 4.1% in the first two months of the year.
While the 6.8% rise in GDP was OK, it was those weaker March readings – including, especially the surprise trade deficit for last month and a sharp dip in factory output growth to a seven-month low – that have analysts wondering if there’s a slowdown ahead (which of course would be of considerable interest to Australia).
Retail sales rose 10.1% in March from a year earlier, compared with a rise of 9.7% in the first two months.
