The latest Chinese economic data out for August shows the pace of economic activity clearly slowing from the already sluggish pace set in July.
In fact, the data helps us understand why China’s Premier Li Keqiang has reportedly cast doubt on the growth target for the country’s economy of 6% to 6.5%.
Reuters reported yesterday that the Premier had said it will be “very difficult” for the country’s economy to grow at an annual rate of 6% or more in the current global climate.
“For China to maintain growth of 6% or more is very difficult against the current backdrop of a complicated international situation and a relatively high base, and this rate is at the forefront of the world’s leading economies,” Li said in an interview with Russian media.
He blamed the global slowdown and trade protectionism as contributing to “certain downward pressure” felt by China’s economy.
In the three months to June, GDP rose 6.2%, the slowest rate in 27 years and data for July and August has been even weaker, especially last month with exports down as well as imports, producer prices slumping deeper into deflation, car sales still falling and now industrial production, urban investment, and retail sales all weaker than expected in August.
As well, bank lending slowed last month (helping explain the 3rd cut in bank reserve ratios this year on August 30). Figures released yesterday show new loans from Chinese banks fell 5.5% from a year in August to 1.21 trillion yuan ($US170 billion), although August lending exceeded the 1.06 trillion yuan lent in July.
In fact, there was a clear weakening in domestic demand and activity last month, judging from the slower than expected growth in industrial output.
It grew by an annual 4.4%, the weakest growth in more than 17 years and down from the 4.8% in July and market forecasts for a rise of 5.2% and close to 6% in August 2018.
August’s data was the slowest growth since February 2002.
The slowdown in industrial output came despite higher growth in crude steel production, while production of car sales rose 4.3%, despite a 6.9% slide in sales.
Although equipment manufacturing sector growth was flat production in the railways, shipbuilding, aerospace, and other transportation equipment sector jumped a solid 10%, according to data from the National Bureau of Statistics.
China’s production of 10 nonferrous metals – including copper, aluminum, lead, zinc, and nickel – in August rose 0.3% from July to 4.91 million tonnes, its second-highest on record. That was also up 4.4% from August 2018, the statistics bureau noted.
China’s primary aluminium output in August fell 0.5% from the previous month, according to Reuters figures because of as unexpected outages at two key smelters reduced production.
China, the world’s top aluminum producer, churned out 2.97 million tonnes of the metal last month, down from 2.984 million tonnes in July, the second-highest monthly total on record, and down 0.3% from a year earlier, the bureau said.
Other figures from the statistics bureau showed retail sales slowing with growth reported an annual 7.5%, from 7.6% in July and market forecasts for a rise to 7.9%.
Falling car sales helped hold back growth and Reuters pointed out that has forced the Chinese Statistics Bureau to introduce a new measure for retail sales which strip out car sales. On that basis, retail sales ex-car sales rose 9.3% in August from the same month a year ago.
Fixed-asset investment also fell short of expectations – it was up 5.5% for the first eight months of the year from the same period in 2018, down from Jan-July’s 5.7%. Analysts had expected a rise of 5.6%.