China's industrial output grows slower than expected

A worker polishing a bicycle rim at a factory in Zhejiang province. Broad activity in China's manufacturing sector remains weak with data showing factory gate prices falling at their fastest pace in over three years last month.
A worker polishing a bicycle rim at a factory in Zhejiang province. Broad activity in China's manufacturing sector remains weak with data showing factory gate prices falling at their fastest pace in over three years last month.PHOTO: REUTERS

BEIJING • China's industrial output grew significantly slower than expected last month, as weakness in global and domestic demand and the drawn-out US-China trade war weighed on activity in the world's second-largest economy.

Industrial production rose 4.7 per cent year on year last month, data from the National Bureau of Statistics released yesterday showed, below the median forecast of 5.4 per cent growth in a Reuters poll.

Indicators showed other sectors also slowing significantly and missing forecasts, with retail sales growth back near a 16-year trough and fixed asset investment growth the weakest on record.

The disappointing economic data adds to the case for Beijing to roll out fresh support for the economy after China's economic growth slowed to its weakest pace in almost three decades in the third quarter as the bruising US trade war hit factory production.

Broad activity in China's manufacturing sector remains weak with data on the weekend showing factory gate prices falling at their fastest pace in more than three years last month.

In the same month, China's official Purchasing Managers' Index also showed activity in the factory sector remained in contraction for a sixth straight month.

"Admittedly, optimism surrounding a phase one US-China trade deal could provide a boost to corporate investment in the near term," Capital Economics China economist Martin Lynge Rasmussen said.

"But even if a minor deal is agreed upon in the coming months, this would merely allow the focus to shift to the more intractable issues that we think will eventually lead the trade talks to break down. The case for further monetary easing remains intact."

Other data yesterday showed China's property investment growth in the first 10 months of this year slowing year on year.

The tariff war between China and the United States has hit global demand, disrupted supply chains and upended financial markets.

While some signs of recent progress in trade negotiations between the superpowers have cheered investors, officials from both sides have so far avoided any firm commitments to end their dispute.

That uncertainty has continued to weigh on manufacturers and their order books.

Yesterday's data also showed fixed asset investment, a key driver of economic growth, grew 5.2 per cent from January-October, against expected growth of 5.4 per cent. The January-October growth was the lowest since Reuters records began in 1996.

Private sector fixed-asset investment, which accounts for 60 per cent of the country's total investment, grew 4.4 per cent in January-October.

On Wednesday, China's State Council said Beijing would lower the minimum capital ratio requirement for some infrastructure investment projects.

Retail sales rose 7.2 per cent year on year last month, missing expected growth of 7.9 per cent and matching the more than 16-year low hit in April.

Consumers have been hit with higher food prices over the past few months, as pork and other meat prices soared.

At the same time, consumers have been reluctant to make big purchases with car sales falling for the 16th straight month last month, data showed on Monday.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 15, 2019, with the headline 'China's industrial output grows slower than expected'. Print Edition | Subscribe