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Déjà Vu All Over Again for Q3 Data Out of China

Déjà Vu All Over Again for Q3 Data Out of China


By Jim Williams

The price of copper eased a bit this morning after data released showed China’s economy grew 6.7 percent in the third quarter. That figure is flat from the previous quarter. Experts say increased government spending and a property boom countered weak exports over the last three months.

“GDP data looked okay, but the industrial production was a bit softer than consensus,” Citi analyst David Wilson said. “Also there is news out on China’s own projections of metals consumption, which suggest that demand growth rates are going to be softer.”

“Economic activity seems to be holding up reasonably well,” economist Julian Evans-Pritchard told Seeking Alpha. “Nonetheless, the recent recovery is ultimately on borrowed time given that it has been driven in large part by faster credit growth and a property market boom, both of which policy makers are now working to rein in.”

That ‘boom’ can be seen in China’s new housing loans to individuals. According to a report released by China’s central bank yesterday, personal property loans skyrocketed to $538.69 billion in the first nine months of 2016. That is more than double the level for the same period last year.

A recent report from CNBC, citing commodity analysts at Goldman Sachs Group, reveals a supply glut could translate to reduced copper prices for the foreseeable future.

“In copper, we expect the main catalyst for the downside will be accelerating oversupply, but we are also conscious that we are entering a weak seasonal period for demand during which period inventories tend to build and prices often come under pressure,” the team from Goldman Sachs added.

The Fed. The Dollar. The Election.
Federal Reserve Vice Chairman Stanley Fischer said on Monday that economic stability could be threatened by low interest rates, but it was “not that simple” for the Fed to hike, helping to drag on the dollar.

“Copper is being driven more by the global macro at the minute, particularly the US dollar, while the other metals are beating their own drums. Its fundamentals are not too bad,” said analyst Daniel Hynes of ANZ in Sydney.

Tonight is the last scheduled presidential debate. We are less than three weeks away from Election Day.  The world is waiting and watching. tED contributor Andrew Hecht voices his opinion without choosing sides. “I believe that regardless of the outcome of the election, the dollar will continue on its medium-term path since May and its longer term trend that commenced in May 2014 when the dollar index was below the 80 level.

“The dollar continues to be a beast and the fact that the central bank is even considering hiking rates ‘reasonably soon’ puts it in a class by itself when compared to other paper currencies around the world,” concludes Hecht.

We will watch the debate and the upcoming election and let you know what it all means when it comes to the price of copper.

 

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