The key indicators for Chinese economic activity in October remained solid, as things like steel production, coal burn and the PMI data suggested. Most interesting were the social finance data, which suggested credit growth took a sharp dive in the month.
Total social finance was down around a third on last years levels, with YTD growth slowing sharply in the last few months.
Underlying this was decidedly slow bank lending, which was pretty much flat on last years level.
Lending from trust products was also very weak and for the first time slipped below levels seen in 2012.
It is surprising there is not more anecdotal evidence about the pain inflicted by the slow down in credit availability, which appears much more restrained than earlier in the year when complaints were much more rife.
Its also surprising that there so far doesn't appear to be a significant impact on real activity.
Indeed, headline activity indicators continued to chug along. Fixed asset investment continued to grew at over 20%YoY, while industrial production lifted at touch to 10.3%YoY.
Some key areas continue to grow much faster than other. Auto sales, for example were incredibly strong in the month at over 20%YoY. This means most forecasts for the full year will have to be revised up.
Other areas are a bit more patchy. While residential sales were strong, growth in the area under construction has been up and down in the last few months.
This patchy growth is being made up for by other areas like commercial buildings and infrastructure in order to satisfy the construction pipeline.
The bigger risk to China is not weak building activity per se, but very weak residential property sales and pricing. This is because many high leveraged local governments and SOEs are dependant on asset price growth and property taxes. So while not ideal, slow residential construction growth is not a disaster.
Adding it all up for steel, crude steel production was again very strong. In the YTD crude steel has grown at 9.2%YoY and it doesn't look like things are set to slow into year end. This means that many numbers for full year 2013 will still be too low. Furthermore, the assessment of raw material markets for 2014 will be tighter than originally anticipated.
Power output lifted a touch to 8.4%YoY, which is reasonably consistent with what is happening at the headline industrial production level.
The China Electricity Council expects power output to slow in Q4 to 6.5%-7.5%, although in reality this is not much of a slow down given that weak comps helped boost the Q3 number to 10.9%YoY.
Its also not a huge problem for coal burn, as hydro generation is dropping year over year. Partial data for October suggests that coal burn is up 12%YoY.
Power plant inventories have risen again to over 81mt and 23 days of consumption, but recent price activity suggests that this is not the end of stocking activity. The QHD price benchmark has jumped sharply in the last couple of days, with some of the wider indices likely to follow suit.
