April 27, 2017
The FTCR China Business Activity Index (BAI), a composite reading of the month-on-month change in activity in the country’s real estate, export and freight sectors, fell in April.
The index dropped back below the 50-point mark that separates expansion from contraction to 49.3 — 2.9 points below last April’s reading and below the 50.7 average of the previous 12 months.
The export and freight indices improved, although the FTCR China Freight Index remained below 50 for a fourth straight month. It rose 0.9 points month on month to 46.8 while our Export Index rose 1 point to 55.8.
But the Real Estate Index, the third of the BAI components, dragged the headline lower in April. While freight and export readings have been relatively steady in recent months, our monthly gauge of the real-estate sector has waxed and waned as the government has struggled to rein in speculative activity.
The index fell heavily in April from a six-month high in March, as developers in first-tier cities reported a sharp fall in sales activity on the back of ever-tighter government restrictions. April’s headline index was down 16.4 points month on month at 50.8, though the reading for just first-tier cities was 43.2.
After a strong post-lunar new-year holiday, the cumulative impact of local government administrative curbs is being felt across all city tiers. It remains to be seen if the impact of these latest restrictions lasts; credit access remains relatively loose and a majority of households expect prices to continue rising in the coming six months.
If April’s data presage a more sustained drop in housing market activity, this will mean slower economic growth. Our readings of the freight and export sectors may suggest that both have recovered from the sharp downturn at the start of last year but China’s economic outlook will be much weaker without support from real estate.
The FTCR China Business Activity Index is a composite reading of business activity and sentiment based on our surveys of companies in the real estate, export and freight sectors. For individual survey methodologies click here. A full set of survey results can be found in our Database.
FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.
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