Headline GDP growth of 7.5% was solid enough for markets to rally rather than weaken. For some reason, the quarterly numbers were mostly ignored in commentary, with QoQ growth of 1.7% actually a little stronger than Q1. It is tough to reconcile these numbers though, with revision to quarterly growth numbers never seemingly affecting YoY data.
With GDP growth currently at 7.6% in the first 6 months and most indicators suggesting growth is unlikely to pick up pace, it seems the consensus for 2013 is still to high.
The most interesting part of the June data releases were the real estate data, where there has been a clear and alarming drop in the pace of residential construction activity. This has been despite the rate of sales remaining strong in the month.
Much weaker residential construction poses significant risks to activity and to commodities in particular. Crude steel production was steady in the month, perhaps aided by FAI growth which is still tracking at ~20%YoY.
But these rates will be much too high if housing construction is slowing rapidly.
Finally power generation growth was a bit better at 6%YoY, despite the drop in headline IP growth to 8.9%. Power generation has been improving slowly but surely since the start of the year and is perhaps more reflective of underlying activity than headline IP.
With coal prices still dropping, it seems likely that better power outcomes are driven by stronger hydro generation than coal burn. It does seem though that coal prices are not too far away from as low as they will go, with stock building activity for winter, which usually starts in September/October, the likely timing of an improvement in prices.
