Realty growth propels China economic upswing in March
Resurgent sales in the real estate sector boosted economic activity in China during March, but exports and freight segments remained weak on the same month. Manufacturing index, Purchasing Managers' Index (PMI), rose to 50.2 points for March 2016.
FTCR China Business Activity Index has combined results of surveys focusing on real estate, exports and logistics segments moving up 57.9 points in March from 50.6 points in February. This indicated the highest reading since October 2014.
A business survey carried out by FT Confidential Research (FTCR), a research unit of Financial Times, indicates robust activity in the Chinese real estate sector. Home sales volumes were encouragingly up pushing FTCR China Real Estate Index to a record high of 78.2 points in March. However, China suffered from decline in exports and freight segments.
After rebounding during January and February, exports and freight segments declined in March 2016. The real estate-led economic activity is also raising more concerns that Chinese government is back to its old game of stimulus pushing home sales. Some economists opine the old stimulus playbook might be in place for recovery in construction activity and creating demand for industrial goods.
Fortune further adds that China's economy didn't witness any major change during the first two months of 2016. The data from London-based Capital Economics reveals a 4.1 percent economic growth in China, with Electricity generation rising and entering into positive zone. Consumer spending remains sluggish though.
The latest growth stability allayed concerns that China was entering further slowdown mode. This notion comes at a time, when Chinese economy is transforming from infrastructure investment-push growth to consumer spending-driven growth. Ongoing conditions in the domestic economy are not holding view of a consumer-spending driven economy. In the past, real estate activity pushed consumer-led activity for some time. Urban middle class people look for asset appreciation if real estate prices move upwards.
Meanwhile, the manufacturing production during March was positive for the economy. Purchasing Managers' Index (PMI), an official manufacturing measuring barometer, rose to 50.2 points for the month, surpassing the forecast of Reuters poll. PMI indicated growth in manufacturing output for the first time since July 2015. The PMI index was 49 in February, the lowest since 2011. China's official services PMI on the other hand, moved up to 53.8 in March from 52.7 in February, as reported by CNBC.
FTCR China survey on consumer activity alone indicates that consumer spending is sluggish, while real estate sales are on a tear. FTCR China Consumer Index is hovering below historical levels. However, a real estate-driven boom is very positive for China's economy for short term. All eyes are on the Chinese government on how it step ups economic reforms and implements changes to its economic structure for sustaining long-term growth.