China’s industrial production and retail sales both slowed in the first two months of the year, highlighting the pressure leaders are likely to face to meet this year’s annual growth target, even as the central bank governor said major stimulus was not needed.
Industrial output rose 5.4 percent from a year earlier in January and last month, the National Bureau of Statistics (NBS) said yesterday, compared with the 5.6 percent median estimate of economists surveyed by Bloomberg.
Retail sales climbed 10.2 percent from a year earlier, missing the 11 percent projected gain in the survey, while fixed-asset investment exceeded estimates with a 10.2 percent increase.
The reports highlight the choice facing policymakers: step up monetary and fiscal stimulus and build up more debt, or let the nation’s industrial engines slow further while reducing overcapacity in the steel, cement and coal sectors.
Crude steel production for the January-to-February period dropped 5.7 percent from a year earlier to 121.07 million tonnes and steel products output fell 2.1 percent to 162.28 million tonnes, the reports showed.
Crude refining in the first two months rose 4.6 percent from a year earlier to 87.08 million tonnes, or about 10.64 million barrels a day, the reports showed. That is down 1.5 percent from the record 10.8 million barrels a day in December last year.
Natural gas production climbed 5.7 percent to 25.1 billion cubic meters during the first two months of the year and coal output declined 6.4 percent to 513.5 million tonnes, data showed.
“The overall growth profile still remains gloomy,” said Zhou Hao (周浩), an economist at Commerzbank AG in Singapore. “The mix of data give us a worrying picture. Activity data remained weak while inflation and property prices are turning around.”
Speaking at a briefing just before the data release, People’s Bank of China Governor Zhou Xiaochuan (周小川) sought to project an aura of calm about the economy, saying that the government would be able to meet its target of at least 6.5 percent growth over the next five years.
“Excessive monetary policy stimulus is not necessary to achieve the target,” Zhou said, reiterating past comments that monetary policy is prudent with a slight easing bias. “If there is not any big economic or financial turmoil, we will keep prudent monetary policy.”
The industrial output slowdown was due to seasonal factors, an NBS official said in a statement.
Weak international demand, deterioration in sectors such as steel and chemicals, and a slump in tobacco output weighed on factory production, the official said.
A bright spot was a pickup in investment in real-estate development following stronger sales. The pace accelerated to 3 percent in the first two months from a year earlier compared with a 1 percent increase throughout last year. The value of property sales in the first two months of this year surged 43.6 percent from a year earlier, while property sales in some mid-sized cities doubled.
Retail sales are still in a double-digit growth range, showing there is no need to panic yet, said James Laurenceson, deputy director for the Australia-China Relations Institute at the University of Technology Sydney.
“Retail sales are struggling under the weight of weaknesses in the rest of the economy,” Laurenceson said. “This increases the pressure on the authorities to present households with a credible economic narrative to bolster the consumer outlook.”
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