Data signal weak start for economy
Print Edition
CHINA’S economic data for January and February combined may indicate a weak start for the economy in 2016, analysts said ahead of the data release next week.
The data may point to lingering deflationary pressure, a continuing slump in the country’s trade, and easing growth in industrial production, fixed-asset investment and retail sales in the first two months amid sluggish demand, they said.
“We expect the upcoming economic data to show a weak start,” said Wang Tao, an economist at UBS.
“January-February’s industrial production likely softened on the back of moderating power and steel output,” Wang said. “Fixed-asset investment stayed weak generally.”
She also estimated external trade to contract sharply but said deflationary pressure may have eased amid a slower pace of producer price declines. She predicted a robust credit growth.
Liu Xuezhi, an economist at the Bank of Communications, echoed Wang’s view on trade, with exports sliding 17 percent and imports diving 20 percent.
“The condition may pose a big challenge for China as the country is still in the middle of industrial restructuring,” Liu said. “The domestic consumption is yet to rise significantly while industrial production still relies much on external demand.”
China’s exports fell 11.2 percent, and imports declined 18.8 percent in January.
Earlier data showed deterioration in both China’s manufacturing and service sectors in February.
The official Purchasing Managers’ Index, a gauge reflecting operational conditions in largely state-owned manufacturing companies, shed 0.4 points from a month earlier to 49 in February, the lowest in more than three years. The official non-manufacturing PMI, a counterpart for the service sector, fell to 52.7 in February from 53.5 a month earlier.
Meanwhile, the rise in inflation is set to be minimal, with the Consumer Price Index, the main gauge of inflation, keeping a modest 1.8 percent in February, Liu said. He added that the Producer Price Index, the factory-gate measurement of inflation, likely fell for a 48th consecutive month.
“We expect the government to announce new accommodative policies, such as more social and infrastructure spending, an easing bias for credit policies, and new investment projects during or after the National People’s Congress meeting,” said Wang with UBS.
China’s economy grew 6.9 percent last year, the slowest annual growth in 25 years.
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