Via Macquarie:
China’s latest macro-release this week gave an ambiguous picture on the health of the economy. Conflicting signals from June and July numbers, between macro and micro data, and with respect to liquidity vs money supply are just some of the issues. We see the property market slowing in 2H but FAI picking up on higher profitability, a structural change positive for metals with a wide application in manufacturing, like copper and aluminium, but negative for those with a higher exposure to property related sectors like steel.
To get a better understanding of the macro picture in China, we think there are three questions that are key to the outlook of the economy, and given China’s heft, also crucial for global commodity markets: 1. Will property market hold up? 2. Will manufacturing/private investment continue to recover? 3. Will there be any change in the liquidity environment? These three factors will have a big impact on FAI and consumption, which are the main drivers for Chinese GDP growth and the main source for commodity demand growth in China.