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Chinese Slowdown Deepens: Industrial Output at 17-Year Low

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Industrial production and fixed-asset investment

According to monthly data released by the National Bureau of Statistics of China (FXI) today, China’s industrial production grew by 5.3% YoY in January and February combined. Usually, to iron out the distortions in data due to the timing of the Lunar Year holidays each year, China releases the combined data for the first two months of the year. The data indicated the slowest pace of expansion in the last 17 years and came in below economists’ expectations of 5.5% and December’s 5.7% gain.

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China’s monthly data suggests more pain

China’s fixed asset investment (or FAI) rose by 6.1%, which was in line with economists’ expectations. Another cause of concern from today’s data release was the unemployment rate, which grew by 5.3% in January and February from 4.9% in December and to the highest level in two years. While China has announced several stimulus measures recently, its economy still seems to be in a deceleration mode. The pressure on unemployment could also be due to the ongoing trade war between the US and China. China, however, is not alone in facing trade woes. Microsoft (MSFT), Amazon (AMZN), Netflix (NFLX), NVIDIA (NVDA), Alphabet (GOOG), and Facebook (FB) are also being impacted by the trade issues between the world’s two largest economies.

Chinese data shows deceleration

Industrial production and FAI are barometers of economic health. While FAI showed stabilization, industrial production indicated a deceleration in the production environment. Economists are expecting further easing measures by the Chinese government to spur business activity. Until then, weak production and construction activity in China should continue to weigh down on commodity prices, especially iron ore prices.

Iron ore prices affect companies such as Rio Tinto (RIO), BHP Billiton (BHP), Vale SA (VALE), and Cleveland Cliffs (CLF).

You can also read Can China Manage Growth without Fueling a Debt Crisis? for more on China’s recent stimulus measures and what they could mean for its economic outlook.

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