Weak April data point to investment woes
Print Edition
A SET of unexpectedly weak activity data for April pointed toward a stalling economic recovery in China, reviving expectations that the government will continue policies aimed at nurturing growth.
Industrial production expanded 8.7 percent from a year earlier, slowing from the pace of 8.8 percent in March, the National Bureau of Statistics said yesterday.
Retail sales in the month rose by a three-year low of 11.9 percent, narrowing from a gain of 12.2 percent in March.
For the first four months of this year, fixed-asset investment growth moderated to 17.3 percent, the lowest level in more than a decade. That compared with an increase of 17.6 percent in the first quarter.
“The data suggest that China’s economy is yet to stabilize,” said Zhou Hao, an economist at Australia & New Zealand Bank.
“If this trend extends into May and June, China’s second-quarter growth could remain below 7.5 percent,” Zhou said. “The authorities would have to further ease monetary policy to help pull the economy out of a state of lethargy.”
Last month, the statistics bureau announced that China’s gross domestic product in the first quarter expanded 7.4 percent, the slowest in 18 months and shy of the official target of 7.5 percent for 2014.
Chen Hufei, an economist at the Bank of Communications, said slower FAI growth was particularly alarming because funding for big infrastructure projects has been a major source of economic stimulus in China.
“Slower investment growth is an indication of slower economic growth for the near future.”
Market watchers had predicted the economy would stabilize after the State Council, China’s Cabinet, in the past month introduced an array of new policies to support growth. The policies included lowering the amount of money rural banks are required to keep in reserve and an accelerated timetable for railway construction in the nation.
Zhu Haibin, JPMorgan chief economist, suggested last week that China should consider extending the so-called reserve requirement ratio to all banks.
Inflation pace moderated to an 18-month low of 1.8 percent in April, according to last week’s data. Money supply picked up, indicating there is room for relaxing the reserve requirement on banks, Zhu said.
However, President Xi Jinping said at the weekend that China’s economy must adapt to a “new normal” in terms of the pace of growth, a comment that many took as a signal that the government has no big new stimulus package up its sleeve.
Not all is bleak on the data front, however.
China’s April trade figures, released last week, reversed March declines in imports and exports. Also, the official Purchasing Managers’ Index, which measures activity in manufacturing, rose to 50.4 in April from 50.3 in March, pointing at modest expansion.
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