China may post weak activity and rising deflation force in December
Print Edition
CHINA may report weak activity and rising deflationary pressure in December, analysts said ahead of the release of economic data later this week.
But the country’s overall economic performance for last year is said to be stable and better than previously expected, they added.
“The upcoming December data will show a still frail economy, tepid production and mounting deflationary pressure” said Wang Tao, an economist at UBS. “The sluggish real activity calls for more policy support.”
Wang predicted further policy actions, including more cuts to the benchmark lending rate, liquidity provisions, quicker pro-growth reforms, increasing fiscal spending and relaxation of property policies in the coming months.
Lian Ping, chief economist at the Bank of Communications, echoed the view for more policy relaxation as “the domestic demand stayed weak, requiring more policy easing to sustain the economic growth momentum.”
He added: “With a low inflation rate, there is room for further policy easing.” Lian predicted the Consumer Price Index, the main gauge of inflation, to remain at a five-year low of 1.4 percent in December. The Producer Price Index, the factory-gate measurement of inflation, may drop 3.1 percent last month, down from the 2.7 percent fall in November.
China’s manufacturing sector grew at the slowest pace in 18 months in December, according to earlier data. While new orders shrank, the components of new export orders rose mildly.
Lian predicted exports may gain 7 percent in December, compared with the rise of 4.7 percent a month earlier. Also, industrial production should have regained some traction last month after the APEC-related factory closures in November.
UBS’ Wang predicted China’s gross domestic product to grow 7.1 percent in the fourth quarter of last year.
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