Housing market spurs China’s retail sales

CHINA’S factory output and retail sales grew faster than expected last month as a strong housing market and a government infrastructure spending spree underpinned growth.

Industrial output grew the fastest in five months as demand for products from coal to cars rebounded. “It is very clear that the data is improving because of the property market. This is not sustainable,” said Commerzbank economist Zhou Hao. “It is a good time for China to deliver on structural reform, especially on the (stateowned entities) side.”

Improvements last month, while modest, suggested China’s third-quarter growth was holding up better than was expected a few months ago and probably remained within the government’s 2016 target range of 6.5percent to 7percent.

Industrial output rose 6.3 percent last month from a year earlier, data showed yesterday. Analysts had expected it to pick up only slightly to 6.1 percent as many plants were closed around Hangzhou to guarantee blue skies for the Group of 20 summit.

China’s steel industry perked up as capacity cuts and production curbs boosted prices and profits, while the infrastructure spending spree and housing boom spurred demand for building materials.

Steel output

China’s crude steel output rose 3 percent last month from a year ago, the sixth consecutive monthly rise. Steelmaker, Baoshan Iron and Steel said yesterday that it had raised its prices for next month.

Retail sales also handily beat expectations, with growth accelerating to 10.6 percent from 10.2percent the previous month. Analysts had forecast an increase of 10.3percent.

Car sales have been strong in China this year, hitting a three-and-a-half-year high last month as buyers rushed to get new wheels before a tax cut expires at the end of the year.

Higher imports

Trade data last week showed imports rose for the first time in nearly two years, while export declines eased. Fixed asset investment was unchanged at 8.1percent over the first eight months of the year.

Still, the rate of growth in investment remained the slowest since December 1999, and details showed a growing imbalance between public and private spending. Investment by state firms surged 21.4 percent in the first eight months of the year. China’s fiscal spending rose 12.7percent.

Property also remained a bright spot, despite fears that a near one-year-long housing boom might be peaking.

Property investment rose 6.2 percent last month year on year, according to Reuters, compared with 1.4 percent in July, while sales by floor space grew 25.5 percent.

Private investment grew just 2.1 percent in the first eight months of the year, the same pace as in January-July and remaining at record lows.

While private firms boosted spending 2.3 percent on a monthly basis, the issue remains a key concern among policymakers, who have pledged to improve operating conditions for the more efficient private sector.

Analysts said China might face a renewed slowdown as the impact of previous policy support faded and as the government and central bank held off on further easing over concerns of rising debt and housing bubbles. – Reuters