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Chinese Industrial Output Growth at 6-Month Low

Nov. 11, 2015
With output at factories, workshops and mines up 5.6% in October year-on-year, lower than the median forecast and still tumbling, the world's second-largest economy continues to struggle.

BEIJING — Industrial production growth in China dropped to a six-month low in October, according to official data released Wednesday, the latest figures to suggest entrenched weakness in the world’s second-largest economy.

Output at factories, workshops and mines rose 5.6% last month from a year ago, the National Bureau of Statistics (NBS) said, the smallest increase since March’s identical figure, edging down from a 5.7% rise in September.

It was also below the median forecast of a 5.8% increase in a survey of economists by Bloomberg News.

The figures come as the world worries about growth in China, a leading engine of global expansion.

Authorities are trying to transform the country’s growth model to a slower but more sustainable one driven by consumption rather than infrastructure investment, but the transition to the “new normal” is proving bumpy.

Overcapacity in manufacturing, a slowdown in the country’s property market and mounting local government debt are among the factors that have weighed on growth.

“The marginal fall in October’s industrial production growth showed support from the rapid development of new industries was still insufficient while traditional industries were having deep corrections,” the NBS said in a statement. “The industrial economy is still facing downward pressures looking forward.”

Gross domestic product expanded 7.3% last year, the slowest pace since 1990, and at 7.0% in each of the first two quarters of this year. It decelerated further to 6.9% in the July-September period, its slowest rate in six years.

After the bleak third-quarter economic data, China cut interest rates for the sixth time since November last year and trimmed the reserve requirement ratio — the amount of cash banks must keep in reserve — to boost lending.

Last week saw the clearest signal yet that Beijing would lower its growth targets, with President Xi Jinping saying annual expansion of only 6.5% for the 2016-2020 period would be enough to meet its goals.

A Retail 'Bright Spot'

Earlier this month, authorities pledged to accelerate reforms following a key Communist Party meeting to plot the country’s path for the next five years, but analysts warn that more needs to be done to stop the slowdown.

“Despite some positive signs and policy easing already undertaken, growth is likely to soften more into 2016,” Louis Kuijs, an Oxford Economics analyst said in a note. “We expect the government to continue to take additional incremental measures to support domestic demand to ensure that growth does not deviate too much from its targets.”

Fixed asset investment, a measure of spending on infrastructure, expanded 10.2% year-on-year in the January-October period, the NBS said.

But retail sales, a key indicator of consumer spending, held up well for the month, growing 11.0% from a year earlier – the fastest increase since a rise of 11.9% in December last year, according to the NBS. It was also slightly better than the median estimate of a 10.9% expansion in the Bloomberg poll.

“Consumption continues to be the bright spot,” Nomura economists said in a research report.

Online retail sales of goods surged 33% in the first 10 months of the year from the same period last year and accounted for 10% of total retail sales, the NBS said.

Wednesday was also Singles Day, an annual promotion in China for Internet shoppers, and e-commerce giant Alibaba Group said that consumers spent more than $10 billion in the first 14 hours of the sale, exceeding last year’s full day total.

Car sales were also positive, with the China Association of Automobile Manufacturers saying sales in the world’s top auto market increased 11.8% in October from a year ago to 2.22 million units, accelerating from a 2.08% rise in September.

By Fran Wang

Copyright Agence France-Presse, 2015

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