China industrial output growth jumps to five-month high

BEIJING – Growth in China’s key industrial production accelerated to a five-month high in July, the government said Friday, providing optimistic pointers for the world’s second-largest economy after months of negative indicators.

Industrial production, which measures output at factories, workshops and mines, rose 9,7% year on year, well above analyst expectations of 9% in a survey by Dow Jones Newswires.

Authorities also announced steady expansion in retail sales and fixed asset investment, and a benign inflation figure of 2,7%, unchanged on last month.

Analysts said the figures pointed to a more stable outlook for China’s economy seen as a key driver of global growth.

Lu Ting, a Hong Kong-based economist for Bank of America Merrill Lynch, told AFP the “overall figures are actually very good, especially the industrial output figure.”

Gross domestic product (GDP) in China expanded 7,8% in 2012, its slowest annual pace in 13 years.

Growth slipped to 7,7% in the January March period this year and slowed further to 7,5% in the second quarter, raising alarm bells over possible deeper weakness.

But after Friday’s figures Lu said: “The momentum, if maintained, would in fact make everyone’s estimation about the second half rather pessimistic, so we will likely see a round of GDP forecast upgrades soon.”

Beijing has set a goal of a 7,5% increase in GDP this year and ANZ economists Liu Li-Gang and Zhou Hao said in a report the better-than expected July data made it “more likely to be attainable”.

Concerns over a hard landing had “largely diminished”, they added. “This should facilitate and accelerate the structural reform agenda in China.”

The government has largely faced down mounting pessimism over the economy and refused to undertake major stimulus efforts as it vows to restructure China’s economy to make it less dependent on exports and investment, and driven more by the power of the country’s consumers.

The output figures came on the heels of robust trade figures Thursday and an official manufacturing survey last week that showed expansion when many analysts had expected a contraction.

Exports and imports, which had contracted in June, rebounded in July, growing 5,1% and 10,9 % year on year respectively, according to the survey.

Two-way trade rose 7,8% year on year, slightly lower than the government’s eight percent target for this year but “showing a stabilising and recovering trend”, the survey said.

July’s output growth figure was higher than June’s 8,9% and marked the best performance since the 9,9$ recorded for January and February, which were released together due to distortions related to Chinese New Year.

Separately, retail sales, a key indicator for consumer spending, rose 13, 2% in July compared with the same month last year, the government said, only a marginal slowing from 13, 3% in June.

Growth in fixed asset investment, a key measure of government spending on infrastructure, increased 20,1% during the first seven months of this year compared with the same period in 2012, unchanged on last month’s rate.

Earlier Friday, the government said that inflation held steady at 2, 7% year on year in July, a result seen as potentially giving the authorities some leeway to take measures to boost the economy if needed.

The consumer price index (CPI) rise was marginally below market expectations of 2, 8% according to the Dow Jones survey. The CPI reading a main gauge of inflation has broadly eased since hitting 3,2% in February during the Chinese New Year holiday, although it rebounded in June to a four month high.

– Nampa-AFP