Industrial growth at 17-year low
BEIJING: China’s economy stumbled more sharply than expected in July, with industrial output growth cooling to a more than 17-year low, as the intensifying US trade war took a heavier toll on businesses and consumers. Activity in China has continued to cool despite a flurry of growth steps over the past year, raising questions over whether more rapid and forceful stimulus may be needed, even if it risks racking up more debt.
After a flicker of improvement in June, analysts said the latest data was evidence that demand faltered across the board last month, from industrial output and investment to retail sales. That followed weaker-thanexpected bank lending and gloomy factory surveys in recent days, along with the return of producer price deflation, reinforcing expectations more policy support is needed soon. “China’s economy needs more stimulus because the headwinds are pretty strong and today’s data is much weaker than consensus,” said Larry Hu, head of Greater China economics at Macquarie Group in Hong Kong.
“The economy is going to continue to slow down. At a certain point, policymakers will have to step up stimulus to support infrastructure and property. I think it could happen by the end of this year.” Industrial output growth slowed markedly to 4.8 percent in July from a year earlier, data from the National Bureau of Statistics showed, lower than the most bearish forecast in a Reuters poll and the weakest pace since February 2002.
Analysts had forecast it would slow to 5.8 percent, from June’s 6.3 percent. Washington had sharply raised some tariffs in May. Infrastructure investment, which Beijing has been counting on to stabilise the economy, also dropped back, as did property investment, which has been a rare bright spot despite worries of potential housing bubbles. Crude steel output fell for a second straight month, while production of motor vehicles continued to fall by double digits. Hi-tech manufacturing output rose by a slower 6.6 percent, and the country’s power output edged up just 0.6 percent.
The industry ministry said last month that China would need ‘arduous efforts’ to achieve its 2019 industrial growth target of 5.5 percent to 6.0 percent. China’s economic growth cooled to a near 30-year low of 6.2 percent in the second quarter, and business confidence has remained shaky, weighing on investment. While officials have cautioned it would take time for higher infrastructure spending to kick in, construction growth has been more subdued than expected.
Fixed-asset investment rose 5.7 percent in January-July from the same period last year, lagging expectations of a 5.8 percent gain and dipping from the previous reading. But readings by sector showed a more marked loss of momentum in critical areas at the start of the third quarter. Infrastructure investment rose 3.8 percent in the first seven months from a year earlier, slowing from 4.1 percent in the first half despite massive local government bond issuance, mainly to fund road and rail projects and other civic works. In a sign the housing market’s resilience may be waning as Beijing cracks down on speculation, property investment slowed to its weakest this year. It rose 8.5 percent in July on-year, from June’s 10.1 percent.
Though home sales inched back to growth, new construction starts cooled. Retail sales are also pointing to growing consumer caution, most evident in slumping auto sales but also in property-related spending on items such as home appliances and furniture. Retail sales rose 7.6 percent in July, well off consensus of 8.6 percent and weaker than the most pessimistic forecast. Sales had jumped 9.8 percent in June, which many analysts had predicted would be temporary. – Reuters