China’s industrial output rose at a faster pace than analysts estimated in August, signaling that the world’s third-biggest economy is maintaining momentum as growth moderates.
Production gained 13.9 per cent from a year earlier, more than that 13 per cent median estimate of 29 economists, a statistics bureau report showed in Beijing today. Consumer prices jumped 3.5 per cent, the most in 22 months, as food costs climbed. Retail sales increased 18.4 per cent.
Today’s data suggest domestic demand is withstanding curbs on bank lending and government crackdowns to cool the property market and meet energy and pollution targets. Bank of America- Merrill Lynch forecasts gross domestic product will expand at least 9.4 per cent this quarter and 9 per cent in the final three months of the year, aiding the global recovery as elevated unemployment caps US growth.
“Domestic demand is robust and the Chinese economy is heading for a smoother and softer landing than people had feared,” said Lu Ting, a Hong Kong-based economist at Bank of America-Merrill Lynch.
The consumer-price gain matched the median forecast in a Bloomberg News survey of 31 economists and compared with 3.3 per cent in July and the government’s full-year target of 3 per cent. Morgan Stanley economist Wang Qing said that inflation is likely to “edge down slowly for the rest of the year.”
Deposit rates
Inflation is 1.25 percentage points above the benchmark one-year deposit rate, encouraging savers to shift money into assets such as real-estate and adding to public concern about rising prices.
Australia and New Zealand Banking Group Ltd said today that China should gradually “normalise” interest rates, initially raising the deposit rate. Credit Suisse AG economist Tao Dong said that while he favours higher rates, policy makers may make no “imminent” move, preferring to support growth.
China is poised to replace Japan as the world’s second- biggest economy this year after reporting a larger GDP in the second quarter.
Urban fixed-asset investment grew 24.8 per cent in the first eight months of 2010 from a year earlier, the statistics bureau said today. That compared with a 24.9 per cent gain for January- through-July. Producer price inflation slowed to an annual 4.3 per cent pace from 4.8 per cent.
“This is a positive set of data which shows the economy has ended its deceleration,” said Stephen Green, Shanghai-based head of China research for Standard Chartered Plc.
Money supply
In a separate statement, the central bank reported August new loans of 545.2 billion yuan ($80 billion) and a 19.2 per cent increase in M2, the broadest measure of money supply. Both numbers were above economists’ estimates. The rebound in M2 growth was the first in nine months.
Trade data released yesterday signaled strength in Chinese demand, with imports jumping 35 per cent from a year earlier in August, more than economists forecast. Last month also saw gains in property transactions and auto sales, led by SAIC Motor Corp and FAW Car Co.
The economy expanded 10.3 per cent in the second quarter from a year earlier after an 11.9 per cent gain in the first three months of the year.
Five-year plan
Industrial-output growth may average 10 per cent in the second half as the government chases energy-efficiency targets in a five-year plan, the Ministry of Industry and Information Technology said on September 7.
The ministry also cited risks to export demand, efforts to cool the property market and a limit to growth due to comparisons with higher year-earlier bases.
