China’s power consumption growth – indicative of slower GDP growth?
It has always amused us that China, with 1.34 billion people (19 per cent of the world’s population of 7 billion) and with an economy of US$8.5 trillion (12 per cent of the world’s GDP of US$70 trillion), can produce their GDP growth rate within days of the quarter end.
In the March 2013 quarter, the annual rate of GDP growth eased back to 7.7 per cent from the 7.9 per cent set in the December 2012 quarter.
Contributions came from domestic consumption (+4.3%), capital formation (+2.3%) and exports (+1.1%).
We like the correlation between Chinese GDP growth and power consumption growth.
Recently, the China Electricity Council lowered its forecast for power consumption growth for 2013 to 4-6 percent.
The Australian resources sector has felt the brunt of the lower expected growth. Caterpillar Inc., a bellwether stock in terms of demand from the mining sector, announced its March 2013 quarterly net income had declined by 45 per cent year on year to $0.88b on a 17.5 per cent reduction in revenue to $13.2b. Comments from the company included:
“We remain very positive on the mining industry for the long term, but it’s clear 2013 is going to be a challenge for our mining business . . . We’re close to the floor in mining”.
Caterpillar’s revenue forecast for 2013 has been cut by around 8 per cent to $59b.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
