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China’s Slumping Cement Output Is a Better Guide to Real Economy

Want to know what’s really going on in China’s economy? Look no further than falling cement output.

It dropped 3.7 percent in August from a year earlier, mainly driven by declining infrastructure investment. On a more stable three-month moving average measure, cement output still shrank from a year earlier.

Cement has minimal inventory and thus better reflects real demand than steel, where production ramps up when prices are high, according to Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong.

“It means the real economy isn’t as hot as what we see from the producer price index or the steel price,” Hu said. “If you want to look at the real economy, cement provides better guidance.”

The August drop in cement output was the steepest since 2015. Steel production, though, rose to a record while property development investment remained steady. Real estate sales and new construction though continued edging down, contributing to less demand for cement.

— With assistance by Xiaoqing Pi, and Kevin Hamlin

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