Sept. 9 (Bloomberg) — China’s industrial output rose at the slowest pace in three years in August, increasing the risk economic growth will decelerate for the seventh quarter.
Production increased 8.9 per cent from a year earlier, the National Bureau of Statistics said today in Beijing. That compared with the 9 per cent median estimate of 35 economists in a Bloomberg News survey and a 9.2 per cent pace in July. A report earlier today showed consumer-price gains accelerated for the first time in five months in August.
The rebound in inflation may constrain the government’s scope to support economic growth that President Hu Jintao said yesterday faces “notable downward pressure.” Europe’s debt crisis has crimped exports and a property crackdown is damping domestic demand, while rising housing and food costs threaten to trigger another round of consumer-price gains.
” A renewed inflationary trend could prove to be a further complication to policy makers’ growth-inflation trade-off,” said Glenn Maguire, chief economist at consultant Asia Sentry Advisory Pty Ltd. in Sydney. “China will have enormous difficulties in crafting a policy response to these divergent price and activity trends.”
Hu reiterated yesterday that China will work to balance “steady and robust growth, adjusting economic structure and managing inflation expectations.” He pledged to boost domestic demand and ensure “basic price stability.”
Speaking to business people at an Asia-Pacific Economic Cooperation forum in Vladivostok, Hu also urged governments in the region to speed up infrastructure development, describing it as key to promoting recovery and achieving sustained and stable growth.
His comments follow a slew of announcements by the Chinese government approving the construction of new roads, railways and urban infrastructure that Nomura Holdings Inc. estimates have a combined value of about 1 trillion yuan ($158 billion).
The Shanghai Composite Index, China’s benchmark stock gauge, rose the most in eight months on Sept. 7 after the nation’s top economic planning agency published the approvals. Sany Heavy Industry Co. the nation’s biggest machinery maker, jumped the most since February 2009 and Anhui Conch Cement Co., the country’s largest cement maker, had its biggest gain since July 2010, on optimism demand for their products will rise.
The yuan had its sixth weekly gain, the longest winning streak since April 2011, after the European Central Bank unveiled a bond-buying plan to revive the region’s growth. The currency rose 0.1 per cent against the U.S. dollar in the week ending Sept. 7 to 6.3430.
Separate reports from the statistics bureau today showed growth in fixed asset investment was 20.2 per cent in the first eight months of the year, little changed from the first seven months. Retail sales climbed 13.2 per cent from a year earlier in August, in line with the median economist estimate.
The growth in industrial output was the weakest since May 2009.
Inflation last month accelerated to 2 per cent from a year earlier after a 1.8 per cent rate in July, the statistics bureau said. The slide in producer prices deepened to 3.5 per cent.
Food inflation accelerated for the first time in five months, rising 3.4 per cent from a year earlier. Consumer prices increased 0.6 per cent from the previous month, the biggest rise since January, while food prices increased 1.5 per cent from July.
UBS AG and ING Groep NV on Sept. 7 cut their forecasts for economic expansion this year to 7.5 per cent amid a weakening global outlook and less forceful policy support than they previously expected. That would be the slowest pace in 22 years.
“The lack of aggressive stimulus has prompted our migration from the soft-landing camp to the hard-landing camp,” Tim Condon, Singapore-based head of Asia research at ING, said before the data release. “Authorities are sufficiently alarmed by the unintended consequences of their 2008 stimulus that they want to avoid a repeat, which a significant monetary easing would risk.”
ING lowered its estimate for China’s third-quarter growth to 7.1 per cent from 8.2 per cent. The economy expanded 7.6 per cent in the three months through June from a year earlier, the least in three years and the sixth straight quarterly slowdown.
The central bank has held off from monetary policy loosening since July 5 when it cut interest rates for the second time in less than a month. It also lowered lenders’ reserve requirements three times between November and May.
“The authorities seem to be running a risky policy experiment to see how well the economy can hold up without any big dose of stimuli,” Yao Wei, a Hong Kong-based China economist with Societe Generale SA, said in a Sept. 6 note. “Although prudent, this approach is prone to large downside risks in the short term.”
Signs are mounting that the slowdown is deepening. An index of manufacturing purchasing managers contracted for the first time in nine months in August as orders shrank, a government- backed report showed on Sept. 1.
New orders obtained by China’s shipyards fell 51 per cent in the first seven months of the year, an Aug. 31 government report showed. China Rongsheng Heavy Industries Group Holdings Ltd., the country’s largest shipbuilder outside state control, last month reported an 82 per cent drop in first-half profit and said new orders in the period slumped to two from 24 a year earlier.
Shen Danyang, a Commerce Ministry spokesman, said last month that the country faces increasing pressure to meet its goal of 10 per cent growth in trade this year.
The customs bureau will issue trade data for August tomorrow. Exports probably rose 2.9 per cent from a year earlier, according to the median estimate in a Bloomberg News survey, after a 1 per cent increase in July. Overseas shipments climbed 24.5 per cent in August last year.
The government is this month expected to announce a package of measures to support exports, the China Daily reported yesterday, citing two unnamed sources from the Ministry of Commerce. Trade figures for August “are not positive and not encouraging,” the paper cited the sources as saying.
–Zheng Lifei. With assistance from Ailing Tan in Singapore, Regina Tan and John Liu in Beijing and Michael Forsythe in Vladivostok. Editors: Nerys Avery, John Liu
To contact the reporter on this story: Zheng Lifei in Beijing at [email protected]
To contact the editor responsible for this story: Paul Panckhurst at [email protected]
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