China Growth Tracker – Iron And Bonds Signal Positive Momentum

We recently published a note on how to track Chinese growth in real-time using financial and commodity market prices. In these weekly reports, we will update the indicator to help us track growth. The latest data shows:

• Our overall short-term growth tracker remains at elevated levels, while the long-term growth tracker has increased (Chart 1). We like to focus on the short-term measure as that tends to drive investor expectations more.
• Within the components of the short-term tracker, while oil price growth is positive, its pace has slowed which has pulsed down the overall headline number (Chart 4).
• However, iron ore, copper, Baltic Dry and bond yield changes were all up on last week. Three-month changes in Iron ore (Chart 2) and Chinese bond yields (Chart 6) are at 12-month highs. Movements in Copper (Chart 3) were more steady. The Baltic Dry growth rate is up after a two-week decline (Chart 5).
• Long-term changes in the components are all positive. Iron ore is up most, with annual growth increasing 23% on last week.
• While the headline short-term tracker has fallen on the week – it remains at high levels and most components were up on the week. Therefore, Chinese growth remains healthy. To make a call on whether momentum in China is falling, we would need a broader reversal in the growth rate of the components.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)