Free Trial

Electricity Consumption Contracts In April, Pricing In Lower ‘Risk on’ Commodity Prices

CHINA
  • China Energy Administration showed on Monday that electricity consumption, which is used as a proxy for domestic economic growth by some analysts, contracted by 1.3% YoY in April after a sharp temporary spike recorded in February (seasonal effect).
  • In the past year, the dramatic lockdown policies imposed by the Chinese government have been weighing on both the real economy and the financial activity.
  • Even though officials still target a 5%-5.5% growth for 2022, sell-side firms have reviewed their forecasts significantly to the downside.
    • For instance, Citi recently downgraded China 2022 GDP growth forecast to 4.2% (from 5.1% previously).
  • We have seen that ‘alternative growth measures’ such as the Li Keqiang Index or China electricity consumption have been pricing in slower growth in addition to lower commodity prices.
  • The chart below shows the sharp deceleration in electricity consumption has been pricing in lower ‘risk on’ commodity prices such as copper.
  • Copper prices have started to consolidate in recent months, down over 15% since early March, but still remains ‘expensive’ according to ‘leading indicators’ such as electricity consumption (or Li Keqiang, 10Y yield…).

Source: Bloomberg/MNI

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.