China’s retail sales and industrial output had their weakest combined start to a year since the global recession in 2009, adding to signs of a moderating rebound in the world’s second-biggest economy.
Retail sales increased 12.3 percent in the first two months of 2013 from a year earlier and industrial production rose 9.9 percent, the National Bureau of Statistics said yesterday in Beijing. Both numbers trailed economists’ estimates. February inflation, distorted by a weeklong holiday, accelerated to 3.2 percent.
March 8 (Bloomberg) — Jian Chang, a Hong Kong-based economist at Barclays Plc, talks about the outlook for China’s economy. China’s exports exceeded forecasts in February, an indication that improving global demand may help to sustain the rebound in the world’s second-biggest economy. Chang speaks with Rishaad Salamat on Bloomberg Television’s “On the Move.” (Source: Bloomberg)
The data may delay any monetary tightening in coming months after the nation’s new leadership team cements its succession this week at the legislature’s annual meeting. Li Keqiang, set to become premier, inherits the task of sustaining a recovery from the slowest economic growth in 13 years while reining in asset prices and surging credit.
“The time is still way off for an explicit policy change” such as raising interest rates or banks’ reserve requirements, Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note. The recovery is being led by “fast investment growth” and “could falter once monetary policy becomes tight on concerns of rising risks of inflation” and a property bubble.
The gain in retail sales was below the lowest economist projection of 13.8 percent and was the smallest for a January- February period since 2004. The increase in factory output compared with the 10.6 percent median estimate in a Bloomberg survey and was the weakest for the first two months since 2009.
Smooth Distortions
The statistics bureau doesn’t break out figures for January and February retail sales and industrial output in an attempt to smooth distortions caused by the timing of the Lunar New Year holiday.
The moderation in sales follows a crackdown by new Communist Party chief Xi Jinping on lavish spending by government officials and state-owned companies, part of efforts to curb corruption and waste. Catering sales growth slowed to 8.4 percent from 13.3 percent in the same period last year, statistics bureau data show.
Shares of Kweichow Moutai Co. (600519), maker of the eponymous high- end white spirit, have dropped 19 percent since Xi took power on Nov. 15, compared with a 14 percent gain in the Shanghai Composite Index.
“Consumption appears to have been hit hard” by the frugality campaign, said Ding Shuang, senior China economist with Citigroup Inc. in Hong Kong. “In general this seems to be a weak start of the year.”
Rising Income
Food prices increased 6 percent in February from a year earlier, down from 10.5 percent in the holiday month in January 2012, government data show.
Goldman Sachs Group Inc. said in a March 6 report that Xi’s campaign may reduce restaurant and food spending enough to lower inflation by close to 1 percentage point, with the caveat that its estimates are “highly uncertain.”
Even with the “negative impact” from the crackdown, “we remain positive about the secular consumption trend given rising household income” and an aging population, said Chang Jian, China economist at Barclays Plc in Hong Kong. At the same time, the “soft” industrial output data show “China’s growth recovery is still not on a solid footing,” she said.
Helen Qiao, chief Greater China economist at Morgan Stanley in Hong Kong, said the industrial production data suggest that recent export numbers were exaggerated. “In view of the strong export figures in the last two months, such IP growth should have been higher than currently reported,” Qiao said in an e- mail.
Overseas shipments exceeded analyst estimates in January and February.
’Unbalanced, Uncoordinated’
Outgoing Premier Wen Jiabao on March 5 set a 2013 economic- growth target of 7.5 percent, unchanged from last year when actual expansion slowed to 7.8 percent, the lowest since 1999.
While Wen said in his final annual report to the National People’s Congress that China’s economic development is still “unbalanced, uncoordinated and unsustainable,” he also said that the role of investment “cannot be underestimated.”
Fixed-asset investment excluding rural areas in the first two months of the year rose 21.2 percent, the statistics bureau said yesterday, against a median economist estimate of 20.7 percent and a 20.6 percent pace for the whole of 2012.
January-February water-production spending doubled from a year earlier and investment in public facilities surged 55 percent, reflecting government pledges to step up spending on urban infrastructure and the environment amid increasing social discontent about pollution.
Peaking Recovery
Gross domestic product rose 7.9 percent in the final three months of 2012 from a year earlier, the first acceleration in two years. Data earlier this month showed February readings of four purchasing managers’ indexes in manufacturing and services fell, suggesting the economic recovery may be peaking.
Falling producer prices may limit government concern that inflation pressure is rising. Factory-gate prices dropped 1.6 percent in February from a year earlier, the same pace as in January and the 12th straight decline, led by lower prices in mining, raw materials and manufacturing goods.