China’s non manufacturing PMI is out today. Before we get to the headline index let’s look at the steel sector sub-component:
A couple of points. Clearly output consolidation has begun. New orders look bleak but exports are slowing a little less rapidly. Inventories of goods and inputs (ore and coal) are both running down sharply.
So, the inventory cycle is well under way but there is no sign yet of a rebound in demand so it could still run for a while.
If demand arrives, the rebound in prices will be powerful. If not, it won’t.
On to the headline index, which rose 1.3 points in August:
All of the bounce seems to have come from input and output prices.