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China factory output, retail sales miss forecasts
August 15, 2017
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BEIJING: China’s factory output slowed more than expected in July while investment and retail sales also disappointed, reinforcing views that the world’s second-largest economy is starting to lose some steam as lending costs rise and the property market cools.

Factory output rose 6.4 per cent in July from a year earlier, the slowest pace since January this year, statistics bureau data showed on Monday.

Analysts polled by Reuters had predicted factory output would grow 7.2 per cent in July, down from 7.6 per cent in the previous month.

Fixed-asset investment grew 8.3 per cent in the first seven months of the year, cooling slightly from 8.6 per cent in the first half of the year. Analysts had expected the growth rate would remain steady.

Despite the softer-than-expected reading, China’s manufacturing activity still appeared to be supported by a year-long construction boom. Beijing has poured money into infrastructure projects that have fuelled demand for products from construction equipment to building materials from cement to steel.

Relatively resilient economic growth is no doubt welcome news for President Xi Jinping ahead a major political leadership reshuffle in autumn, with authorities keen to ensure a smooth run-up to the meeting.

Any sharp drop in industrial activity, which appears to be a low-risk at this stage, would be a concern for policymakers as it risks rippling across the broader economy.

Still, China’s surprising strength so far this year seems unlikely to last. A government crackdown on riskier types of lending has driven a slowdown in credit growth and pushed up financing costs, which are expected to start weighing on the economy in coming months.

Average lending rates edged up to 5.67 per cent in June from 5.53 per cent in March, China’s central bank said on Friday in its second-quarter policy report, adding it will continue working to fend off risks to the financial system.

Concerns about the outlook for domestic demand resurfaced last week after Beijing reported weaker-than-expected import and export data.

Though some economists chalked up softer imports to seasonal or one-off factors such as bad weather, others said it may be a sign that China’s trade growth peaked in the second quarter and is now on a downward trend.

Retail sales rose 10.4 per cent in July from a year earlier, cooling from June’s 11 per cent pace and also failing to meet analysts’ expectations for a 10.8 per cent rise.

To be sure, China has surprised most pundits all year, with the economy growing a faster-than-expected 6.9 per cent in the first half, turbo-charged by heavy government spending, a hot housing market and record bank lending last year.


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