Rates rise looms on rebound in industrial output
Cary Huang in Beijing
Growth may push economy's brake
The mainland's industrial output rebounded last month, growing 18.1 per cent year on year and strengthening the case for further macroeconomic tightening measures amid speculation that another interest rate increase is imminent.
Last month's growth rate exceeded the 17.4 per cent in April and surprised economists. Most had forecast a slowdown after an 18.5 per cent peak in January and February.
The output figures were released just a day after the State Council issued a report warning of the need for further tightening measures.
Industrial output rose 18.1 per cent year on year in the first five months of the year, up from 16.6 per cent growth for all of last year, the National Bureau of Statistics said on its website yesterday.
Booming exports were a key factor in the rapid growth of industrial output. Xinhua said the mainland exported 6.17 million tonnes of rolled steel last month, a decline of 13.8 per cent from the 7.16 million tonnes in April, but representing year-on-year growth of 76.8 per cent.
Net imports of crude oil jumped 11.5 per cent, to 65.83 million tonnes, in the first five months of this year, largely a result of accelerating industrial production.
A State Council report on Wednesday warned of risks facing the economy, indicating the government was considering measures to prevent it from overheating. The cabinet meeting, chaired by Premier Wen Jiabao , highlighted the 'overly fast' growth of industrial production and the need to prevent a rebound in investment growth.
Timothy Condon, chief economist with ING's Singapore-based Asia unit, said the latest data showed the economy was booming.
'Premier Wen said recently that monetary policy needs tightening, which we believe indicates an imminent interest rate hike,' Mr Condon said. He expected a 27 basis-point rate increase in the third quarter.
Hong Liang, chief China economist with Goldman Sachs, said she believed industrial production growth would remain robust in the near future. 'Strong activity growth and rising inflationary pressures highlight the need for further policy adjustments.'
Ms Liang said possible measures could include a further clampdown on high energy-consuming industries, to be led by the National Development and Reform Commission, the mainland's top economic planning agency.
She said fixed-asset investment data for May, to be released today, would also play a part in the government's decision making.
'Given the strong readings in industrial production and exports growth, fixed-asset investment growth is likely to be on the strong side as well,' Ms Liang said.
The mainland's fixed-asset investment rose 25.5 per cent year on year in the first four months.
The bureau said output of transport equipment rose by 27.1 per cent year on year last month; motor vehicles by 25.7 per cent; machinery by 23.5 per cent and cement by 20.7 per cent.