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China’s Building Sales Increase for the First Time since 2013

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China’s building sales

The construction sector accounts for more than half of China’s steel demand. There are several Chinese real estate sector indicators that investors can track. In this part of the series, we’ll analyze the recent trend in China’s building sales. The data were released on June 12 by the National Bureau of Statistics of China.

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Building sales increase

The previous chart shows the YoY (year-over-year) change in China’s building sales. In May, building sales increased by 3.1% YoY.

Apparently, this is the first time since December 2013 that building sales have increased on an annual basis. In April, China’s building sales contracted to -3.1% YoY. And this was the slowest pace of decline since February 2014.

Positive for steel industry

More building sales in China are positive for the global steel industry. The construction industry uses steel products like rebar, decks, and joists. Nucor (NUE), Steel Dynamics (STLD), and Gerdau (GGB) are leading rebar suppliers in the United States.

China (FXI) (MCHI) has cut its benchmark interest rate three times in the last seven months. Lower interest rates may have pushed real estate buyers sitting on the sidelines back into the market.

Real estate prices have also been on a steady decline in China. A combination of lower property prices and cheaper credit are possible reasons for the increase in building sales.

Regardless, building sales shouldn’t be considered in isolation. There are several other Chinese real estate demand indicators that investors should track. In the next part, we’ll discuss these indicators in detail.

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