China's Building Materials Sector Contracts Sharply: Cement -10.8%, Glass -7.9%, Steel -1.7%

[NeptunesVortex]

Sluggish domestic activity is dragging many other categories. Real estate-related categories, such as cement (-10.8%), glass (-7.9%), and steel (-1.7%), were clear underperformers. We may also be seeing the impact of anti-involution policies, as solar cells declined -25.6% YoY in April amid a broader crackdown on overcapacity and excessive price competition.

The impact of the Iran War is also appearing in the data. Crude oil processing volume fell -5.8% YoY on the month.

The weakness of retail sales was broad-based. There are two key themes for this month's data.

The first theme is that we're now paying the price for front-loaded demand from the trade-in policy, which we have been warning about since last year.

• Auto sales also continued to show signs of weakness, down -15.3% YoY. Replacement demand for vehicles purchased in previous years hasn't come in yet, and many prospective buyers have already made their purchases.
• Household appliances (-15.1%) and furniture (-10.4%), two of last year's major beneficiaries for the trade-in policies, are now deeply in contractionary territory.

The second theme concerns a pullback in gold prices following the outbreak of the Iran war. We saw a -21.3% YoY drop in gold and jewellery sales in April, as gold prices stabilised at lower levels -- after falling from record highs at the start of the year.

 

[ety]

China is no longer in that much frenzy of constructions after decades of large scale buildings.