uploads///Industrial output

China’s industrial output growth slows in November

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Dec. 4 2020, Updated 10:53 a.m. ET

Industrial production, fixed-asset investment

Industrial output measures the output of businesses involved in the industrial sector of the economy, including manufacturing, mining, and utilities. Fixed-asset investment, or FAI, is a measure of capital spending. It refers to any investment in physical assets, such as real estate infrastructure and machinery, that are held for more than one year.

FAI is a good indicator of how much investment occurs in a country or region. It’s a closely watched indicator of construction activity in China.

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Industrial production down in November

China’s industrial production grew by 7.2% against an expectation of 7.5%. According to the monthly data released by the National Bureau of Statistics, industrial output, also called factory production, increased by 7.2% year-over-year in October, compared to 7.7% in October.

FAI also slowed down

Growth in China’s FAI continued to slow down in the first 11 months of the year. Urban FAI rose 15.8% year-over-year in the first 11 months of 2014, as compared to 15.9% in the first ten months and 16.1% in the first nine months of the year.

The National Bureau of Statistics said property investment, which affects more than 40 other sectors, continued to cool in the first 11 months. It grew 11.9% year-over-year for the January-November period as compared to 12.4% in the January-October period.

Impact on companies

Industrial production and FAI are barometers of economic health and have slowed due to real estate weakness. More sustained growth needs to be seen before any meaningful positive impact can be expected for industries such as steel, which has a direct impact on iron ore prices.

Iron ore prices affect companies such as Rio Tinto (RIO), BHP Billiton Limited (BHP), Vale SA (VALE), and Cliffs Natural Resources (CLF), as well as the SPDR S&P Metals and Mining ETF (XME).

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