Copper Commentary - 1/20/2023

Flipping the order around this week, let’s start with U.S. economic data. Industrial production slowed from 2.18% Y/Y in November to 1.65% Y/Y in December (-0.7% M/M, down from -0.6%). Interestingly, despite overtime hours in manufacturing slowing along with temporary services help indicating the onset of a slowdown, initial jobless claims decreased further to 190k. The lack of loosening in the labor market stands in stark contrast to headline news about tech layoffs, which in the aggregate are a small portion of the overall job market. On Thursday, the Philly Fed’s General Activity Diffusion Index climbed from -13.7 in December to -8.9 in January. Turning the discussion to China, Liu He told the world in Davos that “China is back”, further reversing course on the last 3 years of policy. While foreign direct investment was reported to be 29% lower Y/Y in December, Beijing appears to put more emphasis on collaboration over confrontation. Some commentators have compared the message from China’s Vice Premier to Xi Jinping’s 2017 speech where he also advocated for globalization. While the Chinese economy grew at the slowest pace in 50 years, Y/Y retail sales surprised positively at -1.8% Y/Y compared to -9.5% expected. Y/Y industrial production also surprised on the upside at +1.3% Y/Y compared to 0.2% expected. Given that weak consumption is China’s real problem, it will be interesting to see consumption behaviors as home prices fell for the 16th month in a row ahead of Lunar New Year.