Overall industrial output fell 0.2% during May (+1.4% y/y) following a 0.5% drop in April, initially reported as -0.3%. A 0.2% rise in production had been expected in the Action Economics Forecast Survey. Manufacturing sector production eased 0.2% (+1.8% y/y) following a 0.1% uptick, revised from no change. Mining output fell 0.3% (-7.2% y/y), the seventh decline in the last eight months. Utility output improved 0.2% (1.3% y/y) after a 3.7% drop.
Manufacturing production is up only 0.2% in the last 3 months. Manufacturing of consumer goods fell 1.2% in the last 2 months after rising 1.0% in March. The inventory correction has begun.
The capacity utilization rate fell to 78.1% and remained below the recovery high of 79.8% reached in November. Mining sector utilization plunged to 83.3%, the lowest level since early 2011. In the factory sector, the capacity utilization rate slipped to 77.0%, down from 78.1% in November. Total industry capacity rose 2.8% y/y while factory sector capacity increased 2.0% y/y.
Declining capacity utilization is a clear threat to profit margins. Here’s a Scotiabank (dated) chart FYI:
The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo increased during June to 59 (20.4% y/y) following an unrevised decline to 54 in May. It was the highest level in nine months and exceeded expectations for 56 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been an 80% correlation between the y/y change in the home builders index and the y/y change in single-family housing starts.
The index of single-family home sales jumped to 65 (22.6% y/y), the highest level in ten years. The index of expected sales during the next six months firmed to 69 (19.0% y/y), also a ten year high.
Realtors reported that their traffic index rebounded to 44 (22.2% y/y), matching the January high. (Charts from Bespoke Investment)
Registrations increased 1.4 percent to 1.15 million vehicles from 1.14 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said Tuesday in a statement. That pared the gain in the first five months of the year to 6.7 percent for a total 6 million autos. (…) May’s figures were also reduced in part by the shift of the Pentecost religious holiday to last month from June 2014. (…)
Among Europe’s biggest car markets, sales declines of 6.7 percent in Germany, the largest, and 3.5 percent in France, which ranks third, weighed on regional growth. Registrations rose 14 percent in Spain, 11 percent in Italy and 2.4 percent in the U.K. (…)
Bloomberg says +1.4% growth. Strangely, the ACEA press release shows May registrations up 1.3% to 1.109 million vehicles…
China’s volume of net crude oil imports and domestic crude production lagged its overall refinery throughput in May, implying a drawdown of 631,000 b/d of crude stocks during the month, Platts calculations based on recently released data showed.
This is the highest monthly drawn down since October 2013, when there was an implied stock draw of 638,000 b/d, according to Platts data. The drawdown last month was also a reversal from April, when 1.03 million b/d of crude was likely added to storage. (…)
The stock draw was mainly due to crude imports sliding to a 19-month low of 5.5 million b/d in May. In comparison, crude imports in April hit a record high of 7.4 million b/d.
Discounting crude exports of 31,000 b/d, net crude oil imports in May averaged 5.46 million b/d, down 11.4% year on year and 25.1% month on month.
On the other hand, refinery throughput rose 7.4% year on year to an average of 10.39 million b/d. But on a month-on-month basis it was 1.5% lower than April. (…)
From January to May, China saw an overall crude inventory build of 278,000 b/d, a 49.7% drop from the same period of last year, according to Platts calculations.
China has apparently not filled storage so far this year. Based on refinery throughput, May was not a strong month for the economy.
But there is another angle to consider:
China has long been the gorilla on the demand side, accounting for 48% of the increase in global oil consumption in the past decade.
Now China is slowing—and even that earlier, rapid growth wasn’t an unalloyed boon for oil producers.
(…) it is clear that the link between growth in China’s economy and oil demand has loosened fundamentally. In 2011, China added more than double the amount of GDP that it did in 2003, yet oil consumption increased by the same amount—roughly half a million barrels a day—in each.
This year, China is forecast by the International Monetary Fund to add 1.3 trillion yuan (about $209 billion) of GDP, in real terms, in line with the last five years. Yet, at 320,000 barrels a day, its growth in oil demand is projected by the International Energy Agency to be the weakest since the crisis year of 2009.
The big culprit, as Ed Morse of Citigroup highlights in a new essay, is diesel, “the core of China’s oil-demand growth in the 20 years before 2010.” Diesel usage has stagnated as the pace of industrialization has slowed. Chinese drivers are pumping more gasoline—especially as SUV sales have taken off—which will keep consumption of oil growing overall. But the intensity of demand, in terms of barrels burned per dollar of GDP, is declining. (…)
Via FT Alphaville:
When calculated on a free-float adjusted basis, Chinese market’s average holding period is about one week – a hallmark of intense speculative trades in the market. Everyone is busy looking for the greater fool. Note that at the height of the Taiwanese bubble in 1989, every available share on the exchange changed hands close to twenty times per annum. That is, the free-float shares on Taiwanese exchange changed hands every 15 days on average.
And all that churn is done on margin: