Commodities Comment-Macquarie LME Summit poll-part 2:economic optimism fades

Feature article.

    The second part of our LME Summit poll focuses on the macro concernsfacing our audience. In general terms, delegates were more bearish about theChinese and global economy, and are fearful the slowdown might get deeper.

    Other concerns were off-market stocks and credit availability; the best chanceof a strong rally more global economic easing.

    Latest news.

    China’s September and 3Q growth numbers came in beating marketexpectations, with industrial production (IP) growing 8% in September (upfrom 6.9% in August), and GDP growth moving down slightly to 7.3% in 3Qfrom 7.5% in 2Q. The rebound of MoM IP growth was particularly strong,jumping to 0.91% from 0.22% in August, possibly due to incomplete seasonaladjustment (though it’s hard to say yet how much of a factor this was). Fixedasset investment (FAI) and property market were much more muted. FAIgrowth registered YoY 13.8%, flat from August and at the lowest level inrecent history. Property sales contracted by YoY 10.3%, moderately betterthan 12.4% YoY decline seen in August. Government policy continued to besupportive, albeit not on a very broad basis, as railway FAI growth surged to45.4% YoY from 24.6% in August, while total infrastructure FAI only improvedmildly to 17.7% YoY from 16.3% in August.

    Meanwhile, total Chinese power generation was up 4% YoY in September,bouncing back from a negative print in August. Within the overall number,thermal power generation was extremely weak, down 6% YoY to the lowestrecorded level since October 2012. The main reason is that hydro continuesto outperform, with generation up 43% YoY. As a result, the thermal share oftotal power generation fell below 70% for the first time in recent history.

    Strong hydro performance is a result of both strong rainfall and base effects