Building activity across China has fallen to its weakest level since the Covid lockdowns of early 2020, with the official construction index down 2.0 points at 47.0 in July and the survey’s compilers attributing part of the deterioration to typhoons that suspended work on projects across the south. That is according to data released by the National Bureau of Statistics on Friday, which puts services activity at 49.3 and the wider non-manufacturing economy at 49.0, its weakest reading since December 2022.
Capital Economics counts the construction print as the lowest in the survey’s history, with manufacturing contracting for the first time in five months at 49.2 and the composite index tracking the whole economy sinking to 49.3, its lowest since the pandemic ended in 2022.
Economists saw none of it coming, with the headline factory index missing the median expectation of 50 in the Reuters poll and the new orders index sliding to 48.5, its weakest since 2023, as front-loaded export shipments began to unwind.
None of the survey’s lines matters more to the wood trade than construction, with China buying more imported logs than any other country and construction sites the destination for the majority of them. New Zealand alone supplies 70 to 80 per cent of the softwood logs arriving at Chinese ports, and China takes 55 per cent of New Zealand’s forestry exports in return.
The wharves tell a steadier story than the survey, with the July market report from PF Olsen putting CFR prices for A-grade logs at US$126 per JASm³, daily offtake holding at 55,000 cubic metres, and inventories stable even as storms and flooding cut activity across South China and the Yangtze River Delta. Those weather systems register in both sets of numbers, slowing the building sites the survey measures and the ports that feed them.
Softwood stocks across China’s eastern seaboard have held inside the 2.4 to 2.7 million cubic metre band that carried the market through the soft autumn demand that squeezed A-grade premiums. The July print deepens a slide that has run for four straight years in log imports, with softwood lumber arrivals half their pre-pandemic peak and American logs only returning to the trade in May.
It comes as China’s top leaders acknowledged “difficulties and challenges facing the economy” at the Politburo’s mid-year meeting a day before the release, pledging faster fiscal spending and a round of incremental policies for the second half.
“Firms believe the latest deterioration in activity will prove short-lived,” Julian Evans-Pritchard, Head of China Economics at Capital Economics, said of expectations gauges that improved even as activity fell, with builders among those counting on a stronger fiscal tailwind in the months ahead.
“There’s a flicker of light at the end of the tunnel,” Marcus Musson, a director of the newly merged Stand Forestry, wrote in his third-quarter outlook, counting lower harvest volumes and shrinking in-market inventories among the levers holding prices through the trough.
