uploads///China industrial output

China’s Industrial Output Growth Slows – Worst in over 6 Years


Apr. 8 2015, Updated 12:05 a.m. ET

Industrial production

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, like real estate infrastructure and machinery, that are held for more than one year.

Article continues below advertisement

Industrial output growth 

China’s industrial production increased by just 6.8% in first two months of 2015 compared to the the same period last year. This is its lowest gain in more than six years. It’s down from 7.9% in December 2014. It also fell way short of the median forecast of 7.6% from a Wall Street Journal survey of 14 economists.

Fixed asset investment slows down 

Annual growth in China’s urban FAI continued to slow down in 2015. This is in addition to the fall it experienced in 2014. It slowed down to 15.7% in 2014. It was 19.6% in 2013. For January and February, FAI grew by just 13.9% YoY (year-over-year). It also missed the expectations for a 15% rise.

Industrial health and iron ore companies

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

Iron ore prices affect companies like Rio Tinto (RIO), BHP Billiton (BHP), Vale SA (VALE), and Cliffs Natural Resources (CLF). It also impacts the SPDR S&P Metals and Mining ETF (XME). Cliffs Natural Resources forms 3.6% of XME.

The iShares MSCI Global Metals & Mining Producers ETF (PICK) is a good way to get exposure to the iron ore sector without choosing individual companies.


More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.