China November factory output up 7.2 percent, misses forecasts, investment cools
Reuters
BEIJING (Reuters) - China's industrial output growth by a less-than-expected 7.2 percent in November from a year earlier, though retail sales expanded 11.7 percent, beating forecasts, the National Bureau of Statistics said on Friday.
Fixed-asset investment, an important driver of economic activity, grew 15.8 percent in the first 11 months of the year from the same period last year, in line with forecasts but easing slightly.
Weak data for October and November has reinforced expectations Beijing will roll out more stimulus measures to avert a sharper slowdown in the world's second-largest economy, either in the form of more interest rate cuts or cuts in banks' required reserve ratios (RRR) to encourage more lending.
KEY POINTS
November IP 7.2 percent year-on-year (forecast +7.5 percent, previous month +7.7 percent)
January to November fixed asset investment (FAI) 15.8 pct year-on-year (forecast +15.8 percent, previous period +15.9 percent)
November power output up 0.6 percent year-on-year, third deceleration in a row
January to November property investment 11.9 percent year-on-year (January to October 12.4 percent)
COMMENTARY
TIM CONDON, HEAD OF RESEARCH ASIA, ING IN SINGAPORE
"At least on the industrial output side, it's holding up pretty well. There may be a little bit of a slowdown coming in."
Fourth-quarter GDP growth "may be a little bit slower than 7.3 percent in the third quarter but not a great deal."
"We're ready for an RRR cut at any point. We think there will be 100 basis points of cuts over the next couple of quarters."
"Our baseline scenario is no more (policy interest) rate cuts."
"Given their demonstrated sensitivity to meeting their growth objectives, I think... the risk, at least to our forecast, is that it's too conservative and that in fact they not only cut the RRR they cut the deposit rates."
ZHOU HAO, ECONOMIST, ANZ IN SHANGHAI
"This data basically maintains the weak momentum we've seen since Q2 and poses the risk that the government will miss the 7.5 pct growth target for this year."
"We have not seen any improvement in activity data in November. I think the government will do some targeted mini-stimulus measures to boost infrastructure projects so it will be able to meet the growth target.
"I also think the PBOC needs to do more to stabilize market expectations – an RRR cut can anchor market expectations on where overall rates are headed and show that the central bank is proactive."
ANDY JI, SENIOR CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SINGAPORE:
"The rest of China's Nov data dump was customarily unexciting. However, while year-on-year numbers are largely flatish, the seasonally adjusted month-on-month growth figures continued their weakening trend. In particular, FAIs increased by just 1 percent (on month), its third weakest pace on record. Similarly, industrial production growth was just 0.50 percent (on month, unchanged from that in October.
"The only 'upside' surprise in retail sales was actually from the base effect. Month-on-month, retail sales rose by 0.9 percent) compared with 1 percent in October. Thus, the softer momentum continues, which doesn't bode well with the near-term outlook in both CNY or AUD."
CHESTER LIAW, ECONOMIST AT FORECAST PTE LTD, SINGAPORE:
"While retail sales have held up well, deflationary producer prices are preventing industrial production from seeing any form of sustained rebound.
"In the Central Economic Work Committee statement yesterday, although there were no growth targets announced for 2015, the leadership said that China’s economy is adjusting to a new normal of slower growth. This means that the double-digit rise in industrial production will be a thing of the past, and we could see yearly growth in retail sales in single-digit territory before too long as well."
DARIUSZ KOWALCZYK, ECONOMIST, CREDIT AGRICOLE CIB, HONG KONG:
"November activity data pack came in mixed as industrial output and fixed asset investment slowed while retail sales accelerated. However, the key is industrial output, which slowed much more sharply than anticipated, to just 7.2 percent year-on-year – the second lowest reading since 2009.
"The data bodes ill for GDP growth in Q4, which is bound to slow further. It will put pressure on policymakers to ease monetary stance again and we expect an RRR cut in December. The data should pressure CNY and CNH rates and FX."
HAIBIN ZHU, CHINA ECONOMIST, J.P. MORGAN IN HONG KONG
"Industrial production is the main disappointment at 7.2 percent (year-on-year) only, so in month-over-month terms that's probably only better than August. August was a decline."
"Retail sales and FAI are still in line or slightly better than expectations."
"This is consistent with our view that in the near-term we're facing more downside risk."
He said factory shutdowns to curb pollution around the Asia Pacific Economic Cooperation leaders' summit in Beijing in November contributed to the weaker industrial production numbers.
LINKS
For details, see the website of the National Bureau of Statistics at http://www.stats.gov.cn
MARKET REACTION
The CSI300 Index of top Shanghai and Shenzhen listings slipped 0.3 percent after the data.
BACKGROUND
- The government's economic growth target of around 7.5 percent for 2014 looks increasingly at risk as a cooling housing market and slowing investment weigh on other sectors, though some officials have indicated that Beijing may tolerate slightly lower growth as long as the job market continues to hold up.
- China's monetary policy will not be too tight or too loose next year as authorities try to sustain a reasonable pace of growth in the economy, which faces considerable headwinds, state media cited the government as saying on Thursday.
The economy faces relatively big downward pressure in 2015, the Xinhua news agency cited the government as saying after its annual Central Economic Work Conference, where authorities chart the growth blue-print for the following year.
- Policymakers have rolled out a series of measures since spring to bolster growth, targeted at the more vulnerable areas of the economy, but momentum has continued to slow.
- After months of insisting major stimulus was not needed, China's central bank unexpectedly cut interest rates on Nov. 21 to shore up growth and ease the burden on debt-laden companies. Analysts see further policy easing in coming months to shore up activity.
(Reporting by China economics team; Additional reporting by Shri Navaratnam in WELLINGTON and Masayuki Kitano in SINGAPORE; Editing by Kim Coghill)
