Official Chinese activity data for the first couple of months is usually grouped together given the shifting timing of Chinese New Year each year. The 2013 data have also been released on a weekend, post the National People's Congress.
While there are signs of strength in some sectors, the problem now becomes too much of a good thing as the perception will be that loose money is blowing bubbles in the property sector. Industrial activity, on the other hand, remains fairly subdued and power generation very weak.
The ebb of IP growth to 9.9%YoY isn't too surprising given the small pull back in the PMI data. Looking at the MoM data, it actually looked quite weak in Jan at just 0.6%MoM, while Feb was about the same as the run rates at the end of 2012 at 0.8%.
What is surprising is how weak power generation was at just 3.4%YoY. Given it was very cold in January and industrial activity was statistically better in February, I would have expected it to be higher than this. The divergence between power and IP, however is nothing new. Although it is strange given things like steel and cement production where comparatively heathy.
Steel production is up a strong 14.2%YoY on the NBS numbers, which gels with what we have seen in the CISA production through the months. Some of this is because things like auto production are doing quite well, which is up 12.4%YoY.
But more importantly, the property market has improved dramatically, with sales sky rocketing and area under construction again turning positive.
The problem with this development is that policymakers are likely to be nervous that loose policy is having an unwelcome effect on housing markets. While a stabilisation in sales and activity would be a welcome development following loosening, it would appear that housing markets are doing much more than that.
And if policymakers are nervous, investors are likely to be increasingly so.
When you add the huge growth in social finance in January, it doesn't paint a picture of sustainable activity that everyone wants to see.
