Concerns about the Chinese economy have been among the major risks spooking investors globally. Concerns about China’s growth outlook impact metal and mining companies (SPY) like Freeport-McMoRan (FCX). China accounts for roughly half of the demand for most metals. China (FXI) is also a major market for US giants like Ford (F) and Apple (AAPL).
On November 14, China released several economic indicators. According to China’s National Bureau of Statistics, “the national economy performed within an appropriate range, maintaining overall stability with momentum of progress.” The data showed that China’s fixed-asset investment grew 5.7% year-over-year in the first ten months of 2018. The growth rates increased 0.3% compared to the first nine months of 2018.
China’s National Bureau of Statistics also noted that “the real growth of the total value added of the industrial enterprises above designated size was 5.9 percent year on year, 0.1 percentage point higher than that of last month.” China’s National Bureau of Statistics pointed to strong exports and imports. However, the data also showed that “the Index of Services Production increased by 7.2 percent year on year, 0.1 percentage point lower than that of last month.”
While the data points released on November 14 look strong, some of the previous economic indicators like automotive sales and the PMI weren’t encouraging. China’s car sales have fallen on a year-to-date basis after a double-digit yearly fall in September and October. The country’s housing boom, which lifted its economic activity over the last few years, has also added to the huge inventory of unoccupied houses that could threaten the country’s mammoth housing sector. If metal prices are an indicator, which they generally are, China’s growth outlook doesn’t look as rosy as it did at the beginning of the year.
Concerns about US companies’ 2019 earnings growth have also been spooking investors, which we’ll discuss in the next part.