Chinese retail figures exceed expectations
China’s factory output and retail sales exceeded forecasts and inflation unexpectedly cooled to the slowest pace in 33 months, signalling the government is boosting growth without driving a rebound in prices.
Industrial production rose 9.6 per cent in October from a year earlier, the National Bureau of Statistics said today in Beijing. That exceeded the 9.4 per cent median estimate of analysts surveyed by Bloomberg News. Retail sales growth of 14.5 per cent picked up from September’s 14.2 per cent. The consumer-price index increased 1.7 per cent.
Today’s reports may offer some comfort to China’s leaders who are meeting in Beijing this week for a once-a-decade power transition and pledged yesterday to double per-capita income in the 10 years through 2020. The pause in monetary easing since July may persist as data increasingly show the economy recovering from a seven-quarter slowdown.
“The key question for investors is whether China’s economic growth has truly bottomed and is recovering,” and the “answer is firmly yes,” said Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong.
Government spending may be playing a key role in the pickup. Fixed-asset investment excluding rural areas increased 20.7 per cent in the first 10 months of 2012 from a year earlier, compared with the 20.6 per cent median analyst estimate and a 20.5 per cent pace in the January-September period.
Spending on central government-invested projects rose 5.1 per cent in the 10-month period from a year earlier, more than double the January-September pace, the data show.
The Shanghai Composite Index of stocks has dropped 5.8 per cent this year through yesterday on concern the slowdown in growth will hurt company earnings. The gauge was down 0.3 per cent as of 1:59 p.m. local time today.
The yuan strengthened 0.1 per cent against the dollar in Shanghai today, touching the top end of its permitted trading range for a fifth day on optimism the nation’s new leaders will take more measures to stimulate growth.
The increase in China’s gross domestic product slowed to 7.4 per cent in the July-September period from a year earlier, the weakest in three years. Expansion will probably speed up to 7.7 per cent this quarter and to 7.9 per cent in the three months through March 2013, based on the median estimate of analysts surveyed Oct. 18-22.
The increase in industrial output was the most in five months and compared with 9.2 per cent in September. Retail sales growth was the highest since March.
The CPI increase was below the 1.9 per cent median estimate of analysts surveyed by Bloomberg News and compared with 1.9 per cent in September. Producer prices declined 2.8 per cent from a year earlier after a 3.6 per cent drop in September.
“Inflation remained comfortably low, but, given more signs of growth recovery, the PBOC will probably stay on the sideline,” said Yao Wei, China economist at Societe Generale SA in Hong Kong, one of two analysts to accurately predict the CPI reading.
China’s consumer-price gains have slowed from a three-year high of 6.5 per cent in July last year as food costs eased.
Food prices rose 1.8 per cent last month from a year earlier, compared with a 2.5 per cent gain in September, according to the statistics bureau. Pork, a Chinese staple, dropped 15.8 per cent from a year earlier, subtracting 0.6 percentage point from the CPI, compared with a 38.9 per cent rise in October 2011.
Zhongpin, a Nasdaq-listed processor of meat for restaurants and stores in China, said yesterday that third- quarter net income dropped 40 per cent as the price of pork fell and costs to support expansion rose, according to a statement from the Changge, Henan province-based company.
Inflation is “currently stable,” the central bank said in its quarterly monetary policy report last week. At the same time, it highlighted risks from increases in costs of imported goods and said prices are sensitive to expansion in demand and stimulus policies.
The decline in the producer-price index compared with the median estimate for a 2.7 per cent drop in a Bloomberg survey of economists. The reading marked the first improvement since prices started falling on a year-earlier basis in March as domestic demand slowed, with the government’s campaign to rein in inflation and property prices and excessive inventories plaguing industries including steel and cement.
The Reserve Bank of Australia reduced its 2013 growth forecast as lower investment and the government’s pledge to deliver a budget surplus restrain the economy. The Bank of Korea kept interest rates unchanged as projected by all economists surveyed by Bloomberg. Malaysia’s exports unexpectedly rose in the first gain in three months in September.
Data from France and Italy today may show industrial production extended declines in September from a year earlier, while Russia’s central bank is forecast by most economists to keep borrowing costs unchanged for a second month, surveys showed.
In the US, the Thomson Reuters/University of Michigan preliminary November consumer sentiment index probably climbed to the highest since 2007, while the Commerce Department may say inventories at wholesalers rose at a slower pace in September.
In China, shrinking stockpiles of some products are setting the stage for replenishment to support an economic rebound and price gains. Stocks of manufacturers’ finished goods contracted in October for a fourth month at close to the fastest pace this year, according to a government purchasing managers’ survey. One measure of coal inventories shows a 40 per cent drop since this year’s peak in June and a gauge of steel stockpiles is the lowest since 2009.
“We believe macro data will remain strong” through the rest of the fourth quarter, Zhang Zhiwei, chief China economist at Nomura Holdings said.