SLOWEST GROWTH PACE SINCE 2002
January-February data signals weaknesses that may lead to more support measures from Beijing
GROWTH in China’s industrial output fell to a 17-year low in the first two months of the year, pointing to further weakness in the world’s second-biggest economy that is likely to trigger more support measures from Beijing.
But a mixed bag of major data yesterday also showed property investment is picking up, while overall retail sales were sluggish but steady, suggesting the economy is not in the midst of a sharper slowdown.
China is ramping up assistance for the economy as this year’s growth looks set to plumb 29year lows, but support measures are taking time to kick in. Most analysts believe activity may not convincingly stabilise until the middle of the year.
Premier Li Keqiang last week announced hundreds of billions of dollars in additional tax cuts and infrastructure spending, even as officials vowed they would not resort to massive stimulus like in the past, which produced swift recoveries in China and strong reflationary pulses worldwide.
“The latest data should partially ease concerns about a sharp slowdown at the start of the year. But the near-term outlook still looks downbeat,” Capital Economics said in a note.
In particular, Capital Economics and others noted that infrastructure investment had not improved as much as hoped after the government began fasttracking road and rail projects last year, raising the risk of a milder-than-expected bounce in construction when work resumes in warmer weather.
Industrial output rose 5.3 per cent in January and February, less than expected and the slowest pace since early 2002. Growth had been expected to slow to 5.5 per cent from December’s 5.7 per cent.
China combines January and February activity data in an attempt to smooth distortions created by the long Chinese New Year holidays early each year, but some analysts say a clearer pic- ture of the economy’s health may not emerge until first-quarter data is released in April.
If the seasonal distortion was removed, output rose 6.1 per cent in the two months, said the National Bureau of Statistics.
China’s own official factory survey, which is seasonally adjusted, showed manufacturing output contracted last month for the first time since January 2009.
China’s manufacturers are facing weaker sales at home and abroad, with exports hit by United States tariffs on Chinese goods and cooling global demand.
Growth in fixed-asset investment, a major growth driver in the past, quickened to 6.1 per cent in the first two months of this year, slightly more than analysts had expected and edging up marginally from 5.9 per cent last year.
Much of the gain appeared due to a bounce in property investment, which quickened to a fiveyear high of 11.6 per cent, though home sales fell.