China’s strongest economic growth since 2015 – Steel output climbs to highest on record

Steel Output Growth in March

Growth of 6.9 percent was the fastest in six quarters! Forecasts beating March investment, retail sales and exports all suggesting the economy may carry solid momentum into spring.

China’s economy rose faster than expected. In the first quarter as higher government infrastructure spending. Also a gravity-defying property boom helped boost industrial output. To the biggest in over two years. Industrial percentage growth is a serious number, showing that China’s economy is based on real astonishing momentum.

China’s steel output rose to a monthly record of 72 million tonnes in March. 1.8 % up! March’s monthly total easily beat the previous record of 70.65 million tons hit in March 2016! In the first quarter, steel production totaled 201.1 million tons, up 4.6 percent from the same period a year earlier.

The growing production as Chinese scrounges bid to profit from prices that soared in 2016 and into this year are undermining the government’s years-long push to cut capacity to make the steel industry more efficient.

The Chinese Government

“The Chinese government has a tendency to rely on infrastructure development. In order to sustain growth in the long term. The question we need to ask is whether this investment-led model is sustainable? As the authorities have trouble taming credit. We need to watch closely whether China’s top leadership will send a stronger signal to tighten monetary policy shortly.” (ANZ info)

China’s total social financing, a extensive measure of credit and liquidity in the economy, reached a record 6.93 trillion yuan ($1 trillion) in the first quarter! Approximately equivalent to the size of Mexico’s economy.

At the same time, spending by the central and local governments rose 21 percent from a year earlier.

“Faster growth in industrial output is the primary factor in the first quarter surprise, and due mostly to higher value-added growth related to supply-side consolidation in heavy industry.” (Brian Jackson, IHS Global Insight)

Real Estate and new construction tempo

Following, Real estate investment also remained robust in the first quarter. Expanding by 9.1 percent on-year. Also the tempo of new construction quickened despite amplifying government measures to cool soaring prices.

Most analysts agree the heated property market poses the single biggest risk to China’s economic growth. But predict the cumulative weight of property curbs will eventually temper activity, not produce an outright crash.

“Sales have started falling, which means tightening measures are starting to take effect,” said Shen Ji anguang, an analyst at Mizuho Securities in Hong Kong, noting that will start to drag on both the services and construction sectors.(Reuters)

More than two dozen cities announced new or additional property cooling measures in March and early April, after curbs late last year appeared to have little lasting effect.

Buoyed by a near 12 percent increase in housing starts, China produced a record amount of steel in March! Though, analysts say warning signs are flashing and they should be concerned.

Rising inventory levels and recent falls in steel prices suggest output has been growing faster than China’s actual demand, raising worries of a glut later in the year, which could heighten trade tensions with the U.S. and its other major trading partners.