--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
By Clyde Russell
LAUNCESTON, Australia, Aug 6 It's not hard to find bearish commentary on the outlook for China's commodity demand, but every so often a little bit of information contrarian to the prevailing market views comes along.
Such a snippet is the latest China Commodity Index compiled by ANZ Banking Group, which shows the weighted average price for a basket of commodities imported by China rose to a three-month high last week.
The index gained 0.6 percent in the week ended Aug. 2, with only industrial metals detracting from the increase. It's 0.4 percent higher than three months ago, but 2.7 percent below the level a year earlier.
Although it doesn't have a long history, the ANZ index is useful as it tracks 22 major commodities and is weighted to reflect China's consumption.
The idea that prices of commodities most commonly used in the world's largest consumer are at a three-month high appears at odds with other recent evidence that economic growth is stalling.
The rise in the official Purchasing Managers' Index to 50.3 in July from 50.1 in June has been about the only significant recent Chinese economic data that has surprised on the upside.
It was also in contrast to the HSBC manufacturing PMI, which fell to an 11-month low of 47.7 in July, well below the 50-level that separates expansion from contraction on a monthly basis.
The concern over weakness in manufacturing and the impact of the authorities' efforts to restructure the economy has led to questions as to whether China will achieve its 2013 target for 7.5 percent growth in gross domestic product.
Worries over China have permeated to commodity-producing countries like Australia, with fears rising that the boom in natural resources is over and the country is now left with the hangover of over-investment in mines.
But as the ANZ index reminds us, sometimes the actual data doesn't quite tally with the prevailing sentiment.
However, it's worth looking at the index in detail, as the softness in China's economic growth has sharpened differences between the performance of different types of commodities.
Since the index is at a three-month high, a good place to start is to look at the sector which has been the best performer and that is agricultural commodities by some margin.
The agricultural sub-index, which has a weighting of 25 percent and contains pork, corn, rice, wheat, soybeans, cotton, palm oil and sugar, has gained 7.6 percent in the past three months.
The only other sub-index with a positive return was the 1.6 percent gain for energy, which carries a 39 percent weighting and is made up of Brent oil, thermal coal and natural gas.
Bulks, with a 21 percent weighting and consisting of iron ore and coking coal, declined 3.2 percent.
Industrials, made up of copper, aluminium, rubber, lead, zinc and nickel, declined 4.9 percent, while precious metals, weighted a 3 percent and consisting of gold, silver and platinum, slumped 11.4 percent.
The breakdown of returns does highlight that the manufacturing sector has been the one doing it tough in China.
The performance for energy would have been stronger if it weren't for thermal coal, with spot prices at Newcastle Port declining almost 11 percent since the end of April, and by 16 percent since the start of the year.
Coking coal, used in steel-making, is mostly to blame for dragging down bulks, as spot iron ore prices .IO62-CNI=SI have dropped by only 3 percent since the end of April.
However, it should be pointed out that iron ore hasn't been steady over the past three months, first slumping to its 2013 low of $110.40 a tonne on May 31 and then rallying 18 percent to close on Monday at $130.20.
Iron ore has gained on hopes that steel demand will increase as China ramps up infrastructure spending, mainly on high-speed railways.
If the ANZ index is to continue to post gains, it's likely that the drivers will rotate, with industrials picking up as manufacturing benefits from some domestic stimulus and a brighter outlook for exports as the U.S. economy recovers.
Meanwhile the agricultural sub-index may struggle to replicate its performance, given weakness in global prices for soybeans, rice, palm oil and natural rubber.
Overall, the ANZ index serves as a reminder that too much of the focus when looking at China's commodity demand is placed on industrial metals and the manufacturing outlook.
While China's export-orientated factories have been the driver of the nation's spectacular growth over the past two decades, their relative importance to the economy is starting to diminish, and so to will the influence of the commodities they consume. (Editing by Himani Sarkar)