China’s growth in factory output fell to a three-year low in July and retail sales weakened, suggesting Beijing might need to launch more stimulus efforts to reverse a painful slowdown in the world’s second-largest economy. Inflation eased further, giving Beijing more room to cut interest rates or boost spending.
Growth in industrial production weakened to 9.2 per cent over a year earlier from June’s 9.5 per cent, its lowest rate since May 2009, data showed on Thursday. Retail sales growth slowed to 13.1 per cent from the previous month’s 13.7 per cent.
“The authorities continue to struggle in reviving growth,” said IHS Global Insight analyst Alistair Thornton in a report. “The government needs to transform its current stimulus push into a stimulus punch.” Analysts expect growth to rebound later this year after it fell to a three-year low in the latest quarter. But they say any recovery from China’s deepest slump since the 2008 global crisis will be too sluggish to revive a slowing global economy.
The slowdown raises the threat of job losses and possible unrest as the ruling Communist Party tries to enforce calm ahead of a once-a-decade handover of power to younger leaders.
The government has cut interest rates twice since the start of June and is pumping money into the economy through more spending on building public works. But it is moving cautiously after its huge stimulus in 2008 crisis ignited inflation and a wasteful building boom.
The unexpectedly weak factory output figures suggest a recovery might delayed until the final quarter of the year, said Alaistair Chan of Moody’s Analytics.
“The slowdown was broad-based, ranging from autos to electrical machinery to ferrous metal smelting,” Chan said in a report. “The numbers suggest that the production cycle is still in a decelerating phase.” Politically sensitive consumer prices rose 1.8 per cent, down from the previous month’s 2.2 per cent and well below last year’s highs. That was driven by a 2.4 per cent rise in food costs.
That gives the government more room to cut interest rates again or step up spending with less risk of igniting a new price spike.