China’s real estate indicators
Since China is the world’s largest steel consumer, it’s important for investors in steel companies such as U.S. Steel (X), AK Steel (AKS), Steel Dynamics (STLD), and ArcelorMittal (MT) to keep track of Chinese steel demand indicators.
Notably, one of the factors that helped the rally in metals and mining shares (GNR) this year has been the improvement in China’s economic indicators. China’s property market saw a rebound this year on the back of government stimulus. However, the impact of these stimulus measures has been fading, as we’ll explore in this article.
- Purchasing land is generally a prerequisite before building can occur. The land area purchased by Chinese real estate enterprises for future developments has fallen 8.5% year-over-year (or YoY) in the first eight months of 2016. The rate of decline was higher by 0.9 percentage points as compared to the first seven months of the year.
- The total floor area (in square meters) under construction by Chinese real estate development enterprises rose by 4.6% in the first eight months of 2016. The rate of growth fell by 0.2 percentage points compared to the first seven months of the year. This was the fourth consecutive month in which growth rates fell on a monthly basis.
- China’s new construction starts rose by 12.2% YoY in the first eight months of 2016 after steadily falling for two years, as we can see in the graph above. However, the growth rate fell compared to the first seven months of the year.
We’ve started to see moderation in Chinese real estate activity after a big spike earlier this year. The slowdown in Chinese construction activity is negative for metals.
In the coming parts of the series, we’ll look at China’s August steel production data. But first, let’s see how’s China’s car sales are progressing this year.