More good news from China after last week’s better than expected import data and a further weakening in the deflationary pressures gripping the country’s huge manufacturing sector.
Data out yesterday showed a rebound after July’s weakness as factory output, investment and retail sales all exceeded economist estimates. That is good news for Australia and helped the Aussie dollar to steady yesterday, but not the local stockmarket which sold off in the afternoon after a sharp rebound early from Monday’s whacking great loss.
Industrial production rose 6.3% year-on-year in August, according to the National Bureau of Statistics, up from 6% in July and the highest rate since the 6.8% reading in March.
Retail sales in August grew 10.6% compared to a year earlier. That was up from 10.2% in July and the same rate as in June.
Retail sales had been forecast to remain unchanged from July, but the 10.6% rate for August and June is the fastest growth rate in 2016 so far.
Urban fixed asset investment grew 8.1% year on year for the year to date in August, steady on July, but that is still around 16 year lows.
Property investment rose 6.2% in August on-year, according to Reuters calculations, compared with 1.4% in July, while sales by floor space grew 25.5%. (The Financial Times said growth was around 5.4% annual in August)
"Property sales continue to expand at a rapid pace. We are skeptical how long this can last given that fundamental factors point to housing demand growth in the low single digits,” Capital Economics economist Julian Evans-Pritchard wrote in a note to clients yesterday.
China’s National Statistics Bureau data released showed cumulative real estate sales in value terms came in at Rmb6.662 trillion (US$997.6 billion) for the first eight months of the year, up 38.7%. In volume terms, floor space sold during the same period grew 25.5%.
China’s steel industry, in particular, has perked up as capacity cuts and production curbs boost prices and profits, while the infrastructure spree and housing boom have spurred demand for building materials from iron beams to cement.
China’s crude steel output rose 3% (see separate story) in August from a year ago, the sixth straight monthly rise.
China’s Ministry of Finance said yesterday in a report that government spending in China was up 10.3% year on year in August – up from growth of just 0.3% in July. State revenues rose 1.7%, down from 3.3% in July.
The finance ministry said in its release that downward economic pressure was likely to continue for some months.
And the better-than-expected data could see growth in the second half coming in above forecasts, according to that note yesterday from Capital Economics China economist Julian Evans-Pritchard.
The strength in industrial output comes despite the fact that factory closures ahead of the G20 summit in Hangzhou earlier this month will have caused some disruptions to output in August. he notes.
"Stronger industrial activity last month appears to have been partly driven by a recovery in investment spending." "The upshot is that today’s data fits with our long-running view that the delayed impact of earlier policy easing means that a stronger second half to this year is likely," he wrote.
"Admittedly, with further monetary easing unlikely in the near-term, this uptick in economic activity is likely to fizzle out going into next year. Nonetheless, the latest evidence of a pick-up suggests that recent concerns that policy easing had failed to provide any noticeable boost to the economy were likely somewhat premature."
