China’s industrial output expanded at a slightly slower pace last month while big ticket investment growth eased, the government announced yesterday, the latest signs of weakness in the world’s second-largest economy.
Industrial production, which measures output at the country’s factories and mines, rose 9.2 percent year-on-year last month, marginally weaker than the 9.3 percent increase in April, the National Bureau of Statistics said.
However, last month’s figure matched the median 9.2 percent gain predicted in a survey of 14 economists by Dow Jones Newswires.
Fixed asset investment — a key measure of government spending — increased 20.4 percent from January through last month compared to the same period last year, the bureau said, slightly weaker than the figure of 20.6 percent covering the first four months of the year.
The figures come amid growing concern over the outlook for China’s economy, which grew 7.8 percent last year, its worst performance in 13 years.
“The macro data for May have confirmed that the economy is stuck in stagnant growth again after quite a brief rebound,” Ren Xianfang (任現芳), senior economist at IHS Global Insight, wrote in a commentary.
“Demand-side indicators are unanimously weak, with extremely weak exports growth and [a] continued slide of fixed-asset investment growth,” he said.
On Saturday, China reported a sharp slowdown in exports last month from April, while imports unexpectedly dropped, amid weakness in the domestic economy and sluggish demand overseas.
Earlier yesterday, the bureau announced that the consumer price index (CPI) — a main gauge of inflation — slowed to 2.1 percent on-year last month, and that prices at the producer level extended their decline.
A drop of 13.8 percent month-on-month in vegetable prices last month was the single biggest factor leading the CPI decline, Yu Qiumei (余秋梅), a senior analyst at the NBS, said in a statement.
The producer price index (PPI) — which measure the costs of goods as they leave factories and is seen as a leading indicator of price trends — fell 2.9 percent compared with a drop of 2.6 percent in April, the bureau said.
“The latest PPI data indicate deflation has deepened,” Ren wrote, describing falling prices at the industrial level as “poisonous” for the economy because “it hurts business profitability, damages balance sheets and thus stunts expansion.”
In April, the government announced a surprisingly weak growth of 7.7 percent for the first quarter. That figure surprised analysts who had expected that growth was likely to accelerate this year after showing strength at the end of last year.
Besides the trade data for last month, other recent indicators have raised alarm bells.
A survey by British banking giant HSBC showed China’s manufacturing activity measured 49.2 last month, an eight-month low.
The government’s own survey of manufacturing activity for last month was more optimistic, unexpectedly rebounding to 50.8 from 50.6 the month before, according to the bureau.
The private and government purchasing managers’ index (PMI) surveys of manufacturing are widely watched indicators of the health of the Chinese economy. Readings above 50 indicate expansion while anything below points to contraction.
In one potential bright spot, the bureau yesterday also announced that retail sales, China’s main gauge of consumer spending, managed a marginal acceleration last month.
Retail sales rose 12.9 percent year-on year last month, the bureau said, slightly higher than April’s 12.8 percent gain.
The government’s economic growth target for this year is 7.5 percent, the same as last year’s.