Growth in China’s investment and factory output missed forecasts last month, pointing to a further cooling in the world’s second-largest economy that is likely to prompt the government to roll out more support measures.
The downbeat data came on the heels of weak trade and inflation readings, raising the chances that third-quarter economic growth might dip below 7 percent for the first time since the 2008-2009 global financial crisis.
“The pace of slowdown in fixed-asset investment is relatively fast — dragged by the property sector, while the factory sector remains sluggish,” said Zhou Hao (周浩), senior economist at Commerzbank AG in Singapore.
“Overall, the economy is very weak and the central bank may have to continue cutting interest rates and banks’ reserve requirement,” Zhou said, adding that he expects growth to dip below 7 percent in the July-to-September quarter.
The central bank has cut interest rates five times since November last year and repeatedly relaxed banks’ reserve requirements in a bid to put a floor beneath the sputtering economy.
Some economists believe current growth is already much weaker than official data suggest. Power output, for example, was up just 1 percent year-on-year last month.
Growth in China’s fixed-asset investment, one of the crucial drivers of the economy, slowed to 10.9 percent in the first eight months of the year from the same period a year earlier, compared with 11.2 percent in the first half, data from the National Bureau of Statistics showed yesterday.
Analysts had forecast an 11.1 percent rise.
Factory output was also weaker than expected, rising 6.1 percent last month from a year earlier. Markets had expected a 6.4 percent increase, compared with July’s 6 percent rise.
Annual growth in China’s real-estate investment also continued to cool, slowing to 3.5 percent in the first eight months, the weakest since early 2009, from 4.3 percent in the first half.
While home sales and prices are slowly recovering from a slump last year — the area of property sold rose at a slightly faster pace of 7.2 percent from January to August — analysts said it would take time for developers to work off a huge overhang of unsold houses and a sharp falloff in new construction would continue to dampen demand for materials from cement to steel.
“The property sector is the biggest drag on China’s economy,” said Yu Pingkang (俞平康), chief economist at Huatai Securities Co (華泰證券) in Shenzhen. “A pickup in infrastructure investment is insufficient to offset the slowdown in property investment.”
Yu has penciled in 6.9 percent growth for the third quarter.
Retail sales were the lone positive surprise, growing 10.8 percent last month from a year earlier, above forecasts of 10.5 percent, the same as July.
However, the increase did not appear to jibe with recent reports from local and foreign firms in China of slowing sales.
Chinese e-commerce giant Alibaba Group Holding Ltd (阿里巴巴), which dominates online sales in the nation, on Tuesday last week lowered its sales forecasts in a fresh signal that the economic slowdown is taking a bite out of consumer spending.
Vehicle sales fell 3 percent last month from a year earlier, the China Association of Automobile Manufacturers said.
Data last week showed that China’s manufacturers last month slashed prices at the fastest rate in six years as commodity prices fell and demand cooled, signaling stubborn deflationary risks in the economy and adding to expectations for further stimulus measures.
Imports last month tumbled more than expected, while exports shrank again, pointing to persistently weak demand both at home and abroad, but Chinese Premier Li Keqiang (李克強) recently brushed off concerns the economy was facing a hard landing.
The government is aiming for annual economic growth of about 7 percent this year, which would be the slowest in nearly a quarter-century.
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