The forecast for activity in China’s property market is perhaps one of the most important variables shaping the global economic outlook in 2016, but conflicting signals from multiple data sources prevent a clear read on trends in the housing sector and the impact on the Chinese economy. As markets await the Q1 output and GDP data later this week, available data show a strong pickup in national property sales activity over the past year has not yet produced a corresponding rise in construction and a rebound in demand growth in heavy industries.
Since early March, markets have focused on improvements in Chinese steel prices, residential real estate investment, credit availability, floor space under construction, and manufacturing indices as evidence of an emerging inflection point in the economy, just as global commodities prices appear to have bottomed and Chinese producer prices rose for the first month in two years. Yet the case for the property sector to lead the Chinese economy out of its deflationary cycle in 2016 remains tenuous at best, given excess inventories of properties in smaller cities and continued weakness in major industrial output indicators.
