China slowdown indicators worrying for commodities…


China growth concerns now more affirmed by the release of ZEW China Economic Panel Indicator (CEP) which fell 17.1 points in the current survey period September 15 to 30, could have a deeper impact on commodities especially metals and energy.

The CEP indicator reflects the assessments of international financial analysts regarding China’s macro economic outlook over the next twelve months. Centre for European Economic Research (ZEW) and Fudan University which releases the report pointed out that At its new level of 1.7 points, the index dropped below its long-term average of 14.9 points.

At the same time, it moves close to the zero line, signaling that optimistic and pessimistic assessments within the sample of experts now balance each other. The current value is the lowest of the CEP Indicator since the survey began in mid-2013.

In line with the decrease in the lead indicator, growth expectations concerning sales volumes in key economic industries diminished as well, with the only exception of the services sector. Regional economic expectations for the six most important cities of mainland China (Tier-1 cities) and for Hong Kong declined likewise, whereas the survey results indicate a slight stabilization of recently downward-trending real estate price expectations.

The assessment of the current macroeconomic situation in China worsened by 17.5 points compared to the previous month. At a new level of -3.4 points, the respective balance of positive and negative assessments continues to fall short of the macroeconomic outlook.

Key indicators including retail sales, fixed- asset investment, import, factory output seems to have fallen in the third quarter.Imports probably fell 2.7% in Sept from a year earlier, the biggest drop in six months. The weak figure could put additional downward pressure on already sliding global commodity prices. Property sector continues to be weak and China cut mortgage rates for second-home buyers by giving 30% discount on loans.Downpayment levels were lowered to 30% from 60-70%.

Base metals, iron ore, steel, crude oil apart from gold and silver are more likely to be impacted by softer trends in China economy.

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