The most recent GDP growth and raw material usage statistics from China are not the product of the anticipated reformed economy with a lowered contribution to growth from investment (and a larger consumption contribution). Of the 7.8% GDP growth reported for the third quarter, 4.3 percentage points appear to have come from investment spending and 3.4 percentage points from consumption. Over the same period, China's steel output rose 8.6%. We should not look a gift horse in the mouth but it would be a mistake to infer that the recently reported numbers are a post-adjustment rate of steel output because the foreshadowed rebalancing of the economy is not yet happening. Presumably, the tilt toward consumption is still to come. Then, we might have a clearer sense of what happens to steel output over the longer haul.
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