The Chinese economy has started 2015 on weak footing, with most of the headline data suggesting activity was more sluggish than expected. Construction activity and industrial production were both weak and with oil prices plunging, metals and bulk commodities have followed suit.
Leading indicators were also weak, but some were a little better in February. The HSBC PMI data rose, while M2 money supply was also quite a bit stronger in the month. Total credit growth in the first two months of the year has slowed, but growth rates are not particularly weak.
Steel production from CISA mills fell from late February levels, but production the first 10 days of March were actually a little higher than both 2014 and 2013.
The seasonal ramp up in steel market activity won't begin until April and with steel prices falling as the Chinese export flood has undermined production in the rest of the world, there is plenty to be concerned about.
But it is important to acknowledge that the starting point in early March is not particularly bad, with inventory at mills and traders also not particularly high. If government infrastructure spend starts to make an impact in the next few months, the decline in Chinese steel consumption may not be as bad as seen at the start of the year.
There are signs that things have improved at the start of March, with coal-burn at a smaller sample of coastal plants suggesting the declines relative to 2014 have narrowed.
Coal-burn and total power generation still don't look particularly strong. But it does appear like an improvement from the first couple of months of the year.
So perhaps some of the other leading indicators released next week will also show some modest improvement. This probably won't dissuade the bears, but an improvement in March would be in contrast to the bearish sentiment pervading markets at present.
