Wednesday, 10 June 2015

China’s Early Indicators Show a Property Revival in May

In World Economy News 10/06/2015

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Early release surveys, high frequency market prices and big data provide insights on critical aspects of China’s economy ahead of the official numbers. The signs for May are tentatively optimistic, with real estate sales picking up and the factory sector stabilizing.
PMIs Show Manufacturing Stabilizing in May
China’s purchasing managers’ indexes point to stabilization in the factory sector, albeit with activity at a low level. Both the official and the HSBC Markit manufacturing PMI edged up in May. That’s raised expectations May’s industrial output will hold at or above April’s 5.9 percent annual increase.
Services Sector Continues to Outperform
PMIs for the services sector continued to show China’s hairdressers and accountants expanding business. Relatively robust growth and job creation in the services sector offsets weakness in manufacturing.
UnionPay Data Points to Rebounding Property Sales
Early signs on the real estate sector are positive. UnionPay Advisors captures data from transactions on China’s dominant payment network to track the main categories of spending. The Tsinghua UnionPay Advisors Real Estate Index was up 27.1 percent year on year in May — the third consecutive month of acceleration.
Metal Prices Mixed
Metal prices present a mixed picture. On the one hand, iron ore has come off its earlier lows. On the other, copper has given up previous gains and steel continues to decline. If there is a recovery in real estate sales, it’s evidently too soon for that to impact expectations on construction.
UnionPay Data Suggests Consumers Are Still Spending
UnionPay Advisors’ data also provide an insight into what’s going on in the consumer sector. Their numbers show growth in spending on hotels and catering held steady in May, at about 13 percent and 6 percent annual growth, respectively.
Exports Continue Contraction
Early indicators on trade pointed to contraction. The flash reading for Korea’s exports — which track closely with China’s overseas sales — slid 10.9 percent year on year in May. While that proved slightly too pessimistic, China’s overseas sales still fell 2.5 percent, a fourth month of decline so far this year.
Food Prices Suggest Inflation Edged Down
Inflation remained decidedly subdued. Our food price tracker rose 2.2 percent year on year in May, down from 2.7 percent in April. Assuming non-food inflation remains unchanged, that should be enough to knock the CPI down from 1.5 percent in April.
Falling Money Market Rates Show Easing Bias
With growth weak and inflation low, policy has begun to shift more decisively into pro-growth mode. The seven-day repo rate fell to 1.9 percent at the end of May from 2.4 percent a month earlier as rumors of expanded easing swirled.

Source: Bloomberg