Signs of a small stirring in China’s sluggish economy in November.
Industrial output growth picked up to a five-month high, perhaps a sign that the various stimulus measures from Beijing in recent months and a string of interest rate cuts and freeing up of more money for bank lending, plus a weaker yuan, may have put a support level under the weak economy.
Factory output grew an annual 6.2% last month, according to figures released on Saturday by China’s National Bureau of Statistics (NBS). That was much better than October’s 5.6% rate and market forecasts for a similar-sized rise.
Growth in China’s fixed-asset investment, one of the main drivers of the economy in recent years, but now faltering, rose an unchanged 10.2% in November – that was considered to be a positive by desperate analysts because it didn’t fall as expected.
And figures issued on Saturday showed a further slowing in property investment last month.
That grew 1.3% in the first 11 months of 2015 from a year earlier, slowing from a 2% rise in January-October and the weakest pace since early 2009 in the depths of the GFC.
So it’s no wonder that crude steel production slowed to the lowest monthly figure for more than two years (apart from the Lunar New Year holiday-impacted February performance).
But the most bullish figure for yet another month was the 11.2% rise in retail sales in November, up from 11% in October and clearly the strongest part of the economy as the country’s service sector expands faster than manufacturing. That’s the fastest growth in retail sales for well over a year.
China posts strong retail sales in November
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The 17.6% jump in passenger car sales last month, after a 11% plus rise in October, is part of that improvement, even though it is being driven by a halving in tax on small cars with an engine size of 1.6 litres or smaller.
The latest data came after weak trade figures were released earlier in the week (especially exports), while imports would have been weaker had not Chinese companies taken advantage of falling prices to boost import more of commodities like oil, copper and iron ore.
November’s inflation readings underlined the persistent weakness in the economy, with producer price deflation still gripping manufacturing and associated sectors (5.9% annual rate in November, the 45th month of deflation in the world’s manufacturing core).
Premier Li Keqiang said earlier this month that China was on track to reach its economic growth target of about 7% this year, and repeated that optimism on Friday.
Despite the upturn in overall output, production data for key commodities such as steel, coal and oil remained weak in November, thanks to continuing oversupply and weak demand, especially from the construction sector.
Crude steel output again fell last month, down 1.6% to 63.32 million tonnes in November from the same month in 2014, but also down 4.2% from October’s 66.124 million tonnes and the second lowest in two years after the holiday-hit 61.945 million tonnes in February. So far this year production has dropped 2.2% to 738.38 million tonnes.
That also saw a 7.8% fall in coking coal production (it’s a key steel-making raw material).
Overall raw coal output, continued to fall in November, down 2.7% from a year ago thanks government measures to try and reduce pollution levels. For the 11 months to the end of November, coal production was down 3.7%.
Output of natural gas rose 0.2% in November from a year earlier, and was up 2.6% in the first eleven months, down from the 7% growth for the same period in 2014.
Domestic crude oil output rose by just half a per cent in November from the same month of 2014 at 17.66 million tonnes. But oil demand fell 1.6%. Crude imports were up in November as the government imported more for its strategic reserve.
