China industrial output tops forecasts, but investment growth sinks to new low
September 14, 2018
BEIJING (Reuters) - China reported better-than-expected industrial output and retail sales on Friday, but a key investment gauge fell to a fresh record low, highlighting the challenges facing Beijing as it tries to support the economy in the face of rising US tariffs. The data, along with earlier softer readings on trade and credit growth, reinforce consensus views that the world’s second-largest economy is cooling but not at risk of a sharp slowdown yet. Industrial output rose 6.1 percent in August from a year earlier, the National Bureau of Statistics (NBS) said, slightly more than analysts had expected and a tick better than July. But production of key goods including motor vehicles and transport equipment actually fell. Output of cars barely grew, while crude steel production increased by just a third of the pace in the previous month. Retail sales rose 9.0 percent on-year. Analysts had expected a gain of 8.8 percent, unchanged from July. Fixed-asset investment growth slowed to 5.3 percent in January-August from the same period a year earlier, weighed down once again by slowing infrastructure growth. Analysts polled by Reuters had expected a reading of 5.5 percent, in line with the previous all-time low announced last month. “The August activity and spending data were a mixed bag. On balance though, they do little to change our view that growth remains on a downward trajectory,” Capital Economics said in a note, adding its own gauge suggested industrial output was much weaker than the official data. Private sector fixed-asset investment rose 8.7 percent in January-August, compared with an increase of 8.8 percent in the first seven months. Private investment accounts for about 60 percent of overall investment in China. Growth in infrastructure spending, a powerful economic driver last year, slowed again to 4.2 percent in the first eight months of the year, compared with a rise of 5.7 percent in January-July. China got off to a strong start this year, but its economic outlook is being clouded by the escalating US trade dispute and cooling domestic demand, triggered in part by a regulatory crackdown on riskier financing. Beijing is trying to accelerate infrastructure investment but analysts warn it will take some time for the benefits to kick in, with economic conditions expected to get worse before they get better. China’s state planner recently warned that the country’s investment growth may weaken even further in the future and authorities should step up fiscal and financial measures to give it a boost. In recent weeks, Beijing has told local governments to speed up the sale of special bonds to raise money for investments. Finance Minister Liu Kun told Reuters such bond issuance will blow past 1 trillion yuan by the end of the current quarter.