China's industrial output growth lowest in 6 months

Tepid industrial growth of the world's second-largest economy could be due to factors like overcapacity in manufacturing, a slowdown in the country's property market and mounting local government debt. However, consumer spending held up well for the
Tepid industrial growth of the world's second-largest economy could be due to factors like overcapacity in manufacturing, a slowdown in the country's property market and mounting local government debt. However, consumer spending held up well for the month, growing 11 per cent from a year earlier.PHOTO: AGENCE FRANCE-PRESSE

5.6% growth last month points to sustained weakness in economy amid govt reforms

BEIJING • Growth in China's industrial production, a measure of output at factories, workshops and mines, fell to a six-month low last month, official data showed yesterday, suggesting sustained weakness in the world's second-largest economy.

Industrial output increased 5.6 per cent last month from a year ago, the National Bureau of Statistics (NBS) said, the lowest reading since March's identical figure, edging down from a 5.7 per cent rise in September.

It was also below the median forecast of a 5.8 per cent increase in a survey of economists by Bloomberg News.

The figures come as the world worries about growth in China, a leading engine of global expansion. The authorities are trying to transform the country's growth model to a slower but more sustainable one driven by consumption rather than infrastructure investment, but the transition to the "new normal" is proving bumpy.

"The marginal fall in October's industrial production growth showed support from the rapid development of new industries was still insufficient, while traditional industries were having deep corrections," the NBS said in a statement.

"The industrial economy is still facing downward pressures looking forward," it said.

Overcapacity in manufacturing, a slowdown in the country's property market and mounting local government debt are among the factors that have weighed on growth.

Gross domestic product (GDP) expanded 7.3 per cent last year, the slowest pace since 1990, and at 7 per cent in each of the first two quarters of this year. It decelerated further to 6.9 per cent in the July to September period, its slowest rate in six years.

After the bleak third-quarter economic data, China cut interest rates for the sixth time since November last year, and trimmed the reserve requirement ratio - the amount of cash banks must keep in reserve - to boost lending.

Last week saw the clearest signal yet that Beijing would lower its growth targets, with President Xi Jinping saying annual expansion of only 6.5 per cent for the 2016-2020 period would be enough to meet its goals.

Earlier this month, the authorities pledged to accelerate reforms following a key Communist Party meeting to plot the country's path for the next five years, but analysts warn that more needs to be done to stop the slowdown.

"Despite some positive signs and policy easing already undertaken, growth is likely to soften more into 2016," Mr Louis Kuijs, an Oxford economics analyst said in a note. "We expect the government to continue to take additional incremental measures to support domestic demand to ensure that growth does not deviate too much from its targets."

Fixed-asset investment, a measure of spending on infrastructure, expanded 10.2 per cent year on year in the January-to-October period, the NBS said.

But retail sales, a key indicator of consumer spending, held up well for the month, growing 11 per cent from a year earlier - the fastest increase since a rise of 11.9 per cent in December last year, according to the NBS.

It was also slightly better than the median estimate of a 10.9 per cent expansion in the Bloomberg poll.

China's consumer inflation waned in October, while factory- gate deflation extended a record streak of negative readings, data released on Tuesday showed.

That followed a tepid trade report suggesting the world's second-biggest economy is not likely to get a near-term boost from global demand, as overseas shipments dropped 6.9 per cent in October in dollar terms from a year earlier.

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 12, 2015, with the headline 'China's industrial output growth lowest in 6 months'. Print Edition | Subscribe