Sput­ter­ing growth en­gines cast shadow on full-year eco­nomic prospects

China Daily (Canada) - - FRONT PAGE - By ZHENG YANGPENG zhengyang­peng@chi­nadaily.com.cn

Key China growth en­gines sput­tered in July af­ter a short-lived re­cov­ery in the sec­ond quar­ter, cast­ing a shadow on its over­all eco­nomic out­look for the com­ing months, ac­cord­ing to the latest of­fi­cial data.

In­dus­trial out­put, the main monthly mea­sure of growth, ex­panded 6 per­cent in July from a year ago, down from 6.8 per­cent in June and end­ing a up­ward streak sinceMarch, theNa­tional Bureau of Sta­tis­tics said onWed­nes­day.

Growth in fixed-as­set in­vest­ments ex­clud­ing ru­ral house­holds edged down from 11.4 per­cent in the first six months to 11.2 per­cent in the first seven months, the slow­est pace since 2000.

The NBS does not pro­vide sin­gle month data.

“A marked de­cel­er­a­tion in China’s in­dus­trial out­put in July shows the ten­ta­tive sta­bi­liza­tion that started in the sec­ond quar­ter has come to a pre­ma­ture end,” said Bloomberg econ­o­mists Field­ing Chen and Tom Or­lik in a state­ment.

“A stum­bling fac­tory sec­tor un­der­lines why China has moved to sup­port ex­port com­pet­i­tive­ness with a de­pre­ci­a­tion of the yuan, and now ar­gues for fur­ther steps to un­der­pin growth in the months ahead.”

Thedis­ap­point­ing­dataare likely to add down­ward pres­sure on the value of the cur­rency, which has be­come more mar­ket-driven, an­a­lysts said.

The data came af­ter pre­vi­ous data show­ing deep­en­ing fac­tory-gate de­fla­tion and a fall in ex­ports in July.

Jiang Yuan, an an­a­lyst with the NBS, at­trib­uted the sharp slow­down in in­dus­trial out­put partly to de­clin­ing ex­ports. Ex­ports fell by 8.3 per­cent over a year ago in dol­lar terms.

Weak­en­ing in­vest­ment and prop­erty de­mand said.

Out­put of crude steel and ce­ment of­ten seen as prox­ies for the prop­erty in­vest­ment sec­tor, con­tracted 4.6 per­cent and 4.7 per­cent over a year ago, re­spec­tively, while elec­tric­ity out­put con­tracted 2 per­cent.

The down­turn is even af­fect­ing sales of air con­di­tion­ers.

De­spite a spate of price cuts by pro­duc­ers and re­tail­ers, sales in the first six months fell 6.6 per­cent over a year ago, ac­cord­ing to AVC, a na­tional elec­tronic ap­pli­ance sale data provider. Re­tail sales growth in July de­cel­er­ated to 10.5 per­cent,

is another rea­son, he ac­cord­ing to the NBS.

Based on the latest data, Bloombergnow­es­t­i­matesChina’s monthly GDP growth will be 6.6 per­cent year-on-year in July, down from 6.9 per­cent in June, a first slow­down since Fe­bru­ary.

Real es­tate in­vest­ment in July slid to 4.3 per­cent year-on-year, re­main­ing a drag on over­all GDP growth. But the slow­down is nar­row­ing, while in­vest­ment in the residential sec­tor rose 3 per­cent, up from 2.8 per­cent in June, the first ac­cel­er­a­tion since 2014.

The on­go­ing warm-up in home sales is driv­ing the re­cov­ery in real es­tate in­vest­ment. July residential sales ac­tu­ally dropped from a high base in June, but com­pared with the same pe­riod a year ago, they have surged 25.5 per­cent in floor-space terms and 40 per­cent in value, ac­cord­ing to China Daily cal­cu­la­tions based on the newNBS data.

Jef­fery Gao, head of No­mura’s China prop­erty re­search sec­tion, said the cur­rent out­look for the coun­try’s prop­erty mar­ket is good, as in­vest­ment slowed and new hous­ing starts de­clined at dou­bledigit pace (17.9 per­cent con­trac­tion in July), mean­ing hous­ing in­ven­to­ries are steadily de­clin­ing.

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