Fri, Aug 10, 2012 - Page 15 News List

PRC’s output drops to three-year low

FACTORY PRODUCTION:Industrial output growth slipped to 9.2 percent year-on-year last month, its weakest in three years. Retail sales growth also eased

Reuters, BEIJING

A woman sells webcams at the main electronics market in Tienhe District, Guangzhou, China, on Wednesday.

Photo: EPA

Annual growth in China’s factory output slowed to its weakest in more than three years last month, missing market forecasts and increasing expectations that Beijing will take further policy steps to support an economy that has been sliding for six straight quarters.

Official data released yesterday also showed China’s annual consumer inflation fell to a 30-month low last month, suggesting that the central bank has ample scope to ease policy again after rate cuts in June and last month to keep the economy on track to meet an official growth target of 7.5 percent for this year.

“The government underestimated the pace of slowdown and there needs to be more aggressive stimulating policies,” said Alistair Thornton, an economist at IHS Global Insight in Beijing.

“The government has signaled that it’s taking a more aggressive line on stimulus measures ... But it’s yet to feed into the real economy, which is why we are seeing such weak activities data for July,” he said.

Hopes of further easing from China boosted riskier assets, with Asian shares rising to a three-month high and the commodity-sensitive Australian dollar testing a four-and-a-half-month peak.

China’s industrial output growth slowed to 9.2 percent year-on-year last month, its weakest since May 2009, down from 9.5 percent in June and below the 9.8 percent forecast in a Reuters poll.

Annual growth in fixed-asset investment, in the likes of real estate, roads and bridges, came in at 20.4 in January-to-July, unchanged from the January-to-June period and just below the 20.5 percent forecast.

Growth of retail sales, the biggest driver of the economy’s expansion in the first quarter, eased to 13.1 percent, short of the forecast of 13.7 percent.

Annual consumer inflation eased to 1.8 percent last month from 2.2 percent in June, pulling back further from a three-year high last July of 6.5 percent, official data released yesterday showed.

Economists polled by Reuters had forecast inflation to ease to 1.7 percent last month.

Consumer prices edged up 0.1 percent last month from the previous month, compared with expectations of a 0.1 percent drop.

Still, there is little sign of inflationary pressures coming from factories.

Last month’s data showed that producer prices fell by 2.9 percent from a year earlier, which was a sharper decline than the 2.5 percent forecast and the steepest fall since October 2009.

It marked a fifth straight month of falling producer prices, reflecting the pressures eating into corporate earnings and capping capital spending.

Chinese President Hu Jintao (胡錦濤) and Premier Wen Jiabao (溫家寶) have promised to step up policy “fine tuning” in the second half of the year to support the economy.

Apart from lowering interest rates, Beijing has also cut the amount of cash that banks must hold as reserves to free up an estimated 1.2 trillion yuan (US$191 billion) for lending in a series of moves since November last year.

The People’s Bank of China said in a report last week consumer inflation might rebound after this month due to seasonal factors and the rising cost of labor and resources.

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