The latest batch of economic data from China suggest that growth continues to be sluggish.
Let’s walk through each of them.
First, industrial production climbed 9.2% on the year, slightly below expectations for a 9.4% rise. Industrial production in May was led by heavy industries, with steel products up 11.3% year-over-year (YoY), up from 8.1% in April. Auto production slowed to 15.7%, from 18.3%, according to Bank of America’s Ting Lu.
Second, fixed asset investment (FAI) was up 19.9% on the year, and year-to-date FAI was up 20.4% on the slightly below expectations for a 20.5% gain. Remember FAI is a good gauge of a country’s investment activity.
A breakdown of FAI activity showed that manufacturing FAI eased to 16.5%, from 17.9% because of “sluggish” external demand. Railway FAI slowed significantly to 24.2% YoY, from 62% in April. But year-to-date railway FAI was up 24.5%, compared with -41.6% last year for the same period. Planned investment, which is a leading indicator of FAI eased to 15.4%, from 17.9%. And finally, property FAI fell to 19.4%, from 23.2% the previous month.
For the month of May, Lu writes that the 2.9% fall in producer prices could cause real FAI to rise a bit.
Third, retail sales climbed 12.9% on the year, in line with expectations. Industries impacted by the government’s crackdown on corruption, like the restaurant industry saw revenue rise 9.2%, from 7.9% in April. Gold and jewelry sales were up 38.4% because of weakness in gold prices.
Fourth, consumer prices were up 2.1% and producer prices fell 2.9%.
What does all of this mean?
Lu writes that the latest data suggests that Q2 GDP growth will be 7.6 – 7.7%, and quarter-over-quarter growth should be 1.8%.
But the government, that is looking for about 7.5% growth for 2013, is unlikely to announce new stimulus and is expected “maintain the current accommodative fiscal and monetary policy.”
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