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Spending, industry output post gains

CHINA'S retail sales and industrial production generated better-than-expected growth in May, countering the sharp fall in exports and reinforcing the importance of domestic demand in the recovery of the world's third-largest economy.

The country's retail sales jumped 15.2 percent from a year earlier to 1 trillion yuan (US$146 billion) last month, up from increases of 14.8 percent in April and 14.7 percent in March, the National Bureau of Statistics said yesterday.

The spending, the strongest so far this year, beat forecasts of a 15 percent increase and was fueled by government subsidies to buyers of cars and some household appliances, analysts said.

May industrial output gained 8.9 percent on an annual basis, up from 7.3 percent in April and 8.3 percent in March, after the country's massive stimulus package started to gain traction.

"Notwithstanding the disappointing trade data in the month, industrial production and retail sales data both beat expectations in May," said Wang Qing, a Morgan Stanley economist. "In general, the latest dataset suggests that the Chinese economy is finding its way along the recovery track, which remains heavily dependent on domestic demand."

Stephen Green, an economist at Standard Chartered Bank (China) Ltd, said the recovery will be bumpy until the real estate sector and exports come back.

"But the real estate rebound at least looks much more imminent than it did three months ago. The support of the Chinese consumers over the next months will be a godsend," Green said.

China's exports plummeted 26.4 percent in May from a year earlier, the statistic bureau said on Thursday, posting the biggest monthly fall in at least 14 years and coming in well below analysts' expectation of a 20 percent drop.

Also on Thursday, China reported that its urban fixed-asset investment registered better-than-expected growth of 32.9 percent in the first five months. The property investment in May alone advanced 12 percent year on year, a massive jump compared with just 1 percent in the January-February period.

China has offered incentives to buyers of big-ticket items, including cars, refrigerators, television sets and washing machines, since the end of last year to stimulate spending.

The campaign helped boost vehicle sales 23.8 percent in May. Spending on household appliances increased 12 percent from a year earlier while furniture sales rose 33.3 percent. At the same time, vehicle production expanded 29 percent in May to 1.14 million units, and output of coal increased 9.6 percent to 250 million tons. Steel production gained 7.4 percent to 57.2 million tons.

A recent report by Boston Consulting Group said that consumers in China and India remained comparatively optimistic despite the troubles in the rest of the world.


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