China’s last big data drop for the month of August had a couple of surprises – growth in investment fell to the lowest level ever, while surprisingly production of commodities used in investment such as steel and cement rose or only dipped by a small amount.
As well retail sales were a bit stronger. But there were few signs that the Chinese economy is now as strong as it was earlier in the year – up to May.
The slowing pace of growth in fixed asset investment took the headlines with the historic low in August. Chinese economists say it was the lowest growth figure since the measure was first released back in 1992.
Fixed asset investment grew 5.3% in the first eight months of the year, according to the National Bureau of Statistics – the slowest pace on record and down from the previous low – 5.5% in July.
But August saw a modest increase in real fixed asset investment in August – up by 0.7% year on year, compared with a drop of 0.9% in July.
Analysts say that infrastructure investment has slowed sharply since May, but the tax cuts and infrastructure spending plans announced in July have not yet taken hold. Those changes were meant to stimulate demand following second-quarter economic growth that came in at the slowest pace since 2016.
Industrial output rose 6.1% in August from a year earlier, the National Bureau of Statistics (NBS) said, slightly stronger than July.
But the production of key goods including motor vehicles and transport equipment actually fell. Crude steel production increased year on year but was down on the record level in July.
National Australia Bank economists said that trends in individual industrial sectors continue to diverge. “Output of consumer electronic products grew strongly – increasing by 17.1% yoy (compared with 13.5% previously). Electricity generation also increased strongly – up by 7.3% yoy. In contrast, motor vehicle production fell significantly – down by 4.4% yoy.
“Construction-related heavy industries recorded somewhat modest growth – with crude steel production increasing yoy (with output easing back from an all-time high recorded in July), while cement manufacturing increased by 5.0% yoy.”
China produced 80.33 million tonnes of crude steel last month, according to the National Bureau of Statistics on Friday. That’s down 1.1% from a record 81.24 million tonnes in July, but still up 7.7% from 74.59 million tonnes in the same month last year.
For the first eight months of the year, China’s steel output was up 5.8% to 617.4 million tonnes.
Analysts point out that production would have been higher in recent months if it had not been for tough production restrictions in major steelmaking regions as part of efforts to clear the country’s polluted skies.
Those restrictions have helped keep steel product prices high for much of this year which in turn has sustained iron ore prices around $US64 to $US69 a tonne for much of the past few months.
Friday’s data release also showed retail sales rose 9.0% year-on-year from 8.8% in July. The NAB commentary pointed out that after inflation “Real retail sales growth slowed further in August, to 6.4% year-on-year – the slowest rate of growth since May 2003.”
