China’s economy off to a slow start
Print Edition
CHINA’S economy made a weak start to the year with the growth of industrial production, retail sales and fixed-asset investment all decelerating in the first two months, the National Bureau of Statistics said yesterday.
The disappointing figures might prompt the government to introduce more easing policies in a bid to prevent growth falling below the target rate of 7 percent, analysts said.
Industrial production in January and February combined rose 6.8 percent year on year, its slowest rate since 2009, and down from 7.9 percent in December, the bureau said.
Retail sales rose 10.7 percent in the period, slowing from 11.9 percent in December and its weakest performance for a decade.
The growth of fixed-asset investment in the first two months slowed to a 15-year low of 13.9 percent, weakening from 15.7 percent from December.
“Figures for the first two months are affected by seasonal factors like the Chinese New Year, but these were much worse than expected and pointed to a sharp weakening of real activity,” said Tang Jianwei, an economist at Bank of Communications.
Zhou Hao, an economist at Australia & New Zealand Banking Group, said the activity data surprised the market, adding that first-quarter growth might fall below 7 percent.
“The extremely weak activity data show China needs to engage in more aggressive policy easing, and we expect a cut in the reserve requirement ratio,” Zhou said.
Component figures showed that crude steel output rose just 2.1 percent in the first two months of the year, slowing from 6.4 percent in December, while a slump in property sales was the major contributor to the slowdown in fixed-asset investment.
“Property sales and new starts contracted by 16 percent and almost 18 percent respectively in January and February combined as the property downturn continued to spread its negative impact through the economy,” said Wang Tao, an economist at UBS.
“Stronger infrastructure investment and better export growth were insufficient to counter the weakening manufacturing, real estate, retail sales and corporate investment activity,” he said.
China’s trade rebounded in February, largely thanks to a strong export sector, earlier data showed. Imports, however, continued to slide.
“Core activity data confirm weakening growth momentum despite stronger-than-expected export growth,” said Wendy Chen, an economist with Nomura.
“The data reinforce our view that the current downtrend is a structural issue involving the correction of the property market and overcapacity in manufacturing,” she said.
To counter the economic weakness, the central bank in February cut interest rates for the second time in three months after reducing banks’ reserve requirement. The government has set a growth target for the year of about 7 percent, down from actual growth of 7.4 percent in 2014, its slowest rate in 24 years.
“The effects of monetary policy easing efforts thus far have been limited‚ and the proactive fiscal policy has been less supportive than expected,” Zhou said.
Chen said it’s possible the government might cut benchmark interest rates and banks’ reserve requirement ratio in each of the next three quarters in a bid to limit the downside risk.
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