China output, consumption pick up in May

File photo of an employee working inside a silk factory in Neijiang

Growth in China’s industrial output and retail sales accelerated in May, with consumption increasing at its fastest pace since December, official data showed Friday, in signs of renewed strength in the world’s second-largest economy.

Industrial production rose 8.8 per cent year-on-year last month, the National Bureau of Statistics (NBS) said in a statement, up from 8.7 per cent in April and matching the median forecast in a poll of 15 economists by the Wall Street Journal.

Retail sales, a key gauge of consumer spending, increased 12.5 per cent last month from a year ago, the NBS said in a separate statement, up from a gain of 11.9 per cent in April and the highest since 13.6 per cent at the end of last year.

The data provided further evidence that economic activity in China is picking up as the government stepped up what economists call a “mini-stimulus” to arrest a slowdown seen earlier this year.

Friday’s numbers “signal that China’s growth momentum may soon bottom out, despite some downside risks”, economists at ANZ Bank said in a research note, also citing an acceleration in export growth announced earlier this week.

China’s gross domestic product grew by 7.4 per cent in the first three months of 2014, weaker than the 7.7 per cent recorded in October-December and the worst pace since a similar 7.4 per cent expansion in the third quarter of 2012.

Fixed-asset investment, a main measure of government spending on infrastructure projects, slowed marginally to 17.2 per cent year-on-year in the January-May period from a 17.3 per cent rise in the first four months of the year, extending a decelerating streak that began in September.

China’s leaders say they want consumer spending and other forms of private demand to propel the economy into a future of more sustainable, albeit slower, growth, and reduce an over-reliance on huge and often wasteful investment projects.

Beijing has introduced a number of measures to boost growth, including cuts in the amount of cash selected lenders must keep on hand in a bid to spur lending, financial support for small companies and targeted infrastructure outlays such as for railway lines and shantytown renovation.

But it has so far refrained from more aggressive steps such as interest rate cuts, citing worries about excessive credit.

“In our view, while the policy fine-tuning is not sufficient to change the trajectory of the growth profile, it will help lift the sentiment and stabilise the growth over the foreseeable future,” the ANZ economists added.

Zhang Zhiwei, a Hong Kong-based analyst with Nomura International, said that he expects the stimulus measures to help stabilise economic growth at 7.4 per cent in the second quarter and 7.5 per cent for the full year, matching the government’s 2014 target.

He added, however, that Nomura does not see the recovery as sustainable over the medium term.

“We continue to expect growth to slow to 6.8 per cent in 2015,” he write in a note.

The main risk to growth, analysts say, stems from the country’s cooling property market, a sector key to driving economic expansion, local government revenue creation and maintaining the stability of China’s financial system given huge loans granted to developers and home buyers.

New home prices in major Chinese cities posted their first month-on-month decline in nearly two years in May, an independent survey showed, with analysts pointing to factors including stringent bank loan criteria, expectations of falling prices, and financial trouble among developers.

The NBS data also showed growth in property investment in the five months through May slumped to 14.7 per cent, the lowest since 12.5 per cent in August 2009 amid the global financial crisis, indicating that developers remained cautious.

“The broader picture is that the property sector is still putting downwards pressure on the economy,” Julian Evans-Pritchard, an analyst with research firm Capital Economics, said in a report.

 

 

 

 

 

 

 

Source : Channel News Asia | June 13, 2014

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Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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