China industrial output growth slowest in 17 years
BEIJING (Reuters) – 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 at present.
China is ramping up assistance for the economy as 2019 growth looks set to plumb 29-year lows, but support measures are taking time to kick in. Most analysts believe activity may not convincingly stabilize 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 has not improved as much as hoped after the government began fast-tracking road and rail projects last year, raising the risk of a milder-thanexpected bounce in construction when work resumes in warmer weather.
Industrial output rose 5.3 percent in January-February, less than expected and the slowest pace since early 2002. Growth had been expected to slow to 5.5 percent from December’s 5.7 percent.
China combines January and February activity data in an attempt to smooth distortions created by the long Lunar New Year holidays early each year, but some analysts say a clearer picture 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 percent in the two months, the National Bureau of Statistics said.
China’s own official factory survey, which is seasonally adjusted, showed manufacturing output contracted in February for the first time since January 2009.
China’s manufacturers are facing weaker sales at home and abroad, with exports hit by US tariffs on Chinese goods and cooling global demand.
US President Donald Trump said on Wednesday he was in no rush to complete a trade pact with China and insisted that any deal include protection for intellectual property, a major sticking point between the two sides during months of negotiations.
Growth in fixed-asset investment, a major growth driver in the past, quickened to 6.1 percent in the first two months of this year, slightly more than analysts had expected and edging up marginally from 5.9 percent in 2018.
Much of the gain appeared due to a bounce in property investment, which quickened to
a five-year high of 11.6 percent, though home sales fell.
Infrastructure investment, which the government is relying on heavily to drive an economic recovery, rose 4.3 percent on-year. But several analysts including Nomura estimated growth momentum may have eased despite Beijing’s push.
Private sector fixed-asset investment also lost a step, rising 7.5 percent versus an increase of 8.7 percent in 2018. Private investment accounts for about 60 percent of overall investment in China, and Beijing has spent considerable effort trying to ease financial strains on smaller, private firms.