Clyde Russell is a Reuters columnist. The views expressed are his own.
LAUNCESTON, Australia, April 16 (Reuters) – China’s economic growth data contains a short-term positive and longer-term negative for commodity demand in the world’s largest user of raw materials.
The positive is that gross domestic product (GDP) growth of 1.4 percent in the first quarter is soft enough to justify the mini-stimulus spending on infrastructure planned by the authorities.
While many in the market will focus on the year-on-year GDP growth of 7.4 percent being ahead of the market consensus for 7.3 percent, the more important figure is the quarterly outcome. If annualised, this would come in at 5.8 percent, well below the government’s target for 7.5 percent growth.
Even a mini-stimulus that boosts spending on rail and other infrastructure would be positive for demand for major commodities, such as iron ore, copper, crude oil and coal. There are, of course, risks to the short-term outlook in the form of a crackdown on using commodities as collateral for financing deals.