Allan von Mehren
Danske Bank A/S
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We now see very clear signs that the Chinese housing market is slowing: October home sales growth stayed in negative territory and PMI construction for October was at the lowest level since March 2016.
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The declining activity comes on the back of a long range of tightening measures starting mid-2016 fuelling a sharp decline in credit growth.
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We look for a continued slowdown of Chinese housing over the next 12 months as credit tightening continues and there is no sign of an easing of the policy. Weaker housing is main reason why we expect a moderate slowdown in the overall Chinese economy.
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Low inventories of houses will serve as a buffer and should ensure that this does not turn into a ‘hard landing' in construction – as we witnessed in 2015 when housing inventories were elevated.
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The construction slowdown is expected to weigh on global metal prices and we forecast small declines. China will move from an inflationary global force over the past two years to a deflationary force again.
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Nordic export companies exposed to the Chinese construction sector should expect weaker growth rates in 2018 following two robust years in 2016 and 2017. Nevertheless, the slowdown of housing is desirable to ensure a soft landing now rather than a hard landing later.
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