China’s industrial output and retail sales exceeded forecasts last month while inflation rebounded from a 33-month low in signs the economic recovery is accelerating.
Factory production climbed 10.1 per cent in November from a year earlier, the National Bureau of Statistics said on Sunday in Beijing, compared with the 9.8 per cent median estimate of analysts surveyed by Bloomberg News. Retail sales growth accelerated to 14.9 per cent, while the consumer price index rose 2 per cent from a year earlier.
Today’s reports may reassure China’s new leadership under Communist Party chief Xi Jinping that growth in the world’s second-largest economy, which has slowed for seven quarters, will exceed the government’s target this year. The data may also reduce the odds of additional fiscal or monetary easing to support expansion.
“The Chinese economy is now in a sweet spot and can stay in the sweet spot” through the first half of next year, Lu Ting, head of Greater China economics at Bank of America in Hong Kong, said in a note today. “The current macro backdrop should bolster asset prices from equities to commodities.”
China’s benchmark stock gauge, the Shanghai Composite Index, rose 4.1 per cent last week, the most in a year, on expectations the recovery will gather pace and as the ruling Politburo signaled an increased focus on urban development.
The rise in retail sales compared with the 14.5 per cent median estimate of analysts surveyed by Bloomberg News. Fixed-asset investment excluding rural households in the first 11 months of the year rose 20.7 per cent, the same pace as in the January-October period. Economists had forecast a 20.9 per cent gain.
Output of rolled steel rose 16.5 per cent in November from a year earlier, up from an 11.7 per cent pace in October, while electricity production increased the most since February, government data showed. Industries with accelerating growth included telecommunications and computers, ferrous metal smelting and pressing and general-purpose equipment, according to the statistics bureau.
“Growth is on track to rebound sharply” above 8 per cent this quarter, said Zhang Zhiwei, chief China economist at Nomura Holdings in Hong Kong. Inflation probably “bottomed in October and will likely rise further in December and next year, as growth picks up and adds inflationary pressure,” Zhang said.
Consumer inflation compared with the 2.1 per cent median estimate in a Bloomberg News survey of 35 economists and a 1.7 per cent gain in October. Producer prices fell 2.2 per cent, the ninth straight drop, while the pace of the decline moderated for a second month. Deflation eased in costs for mining, raw materials and manufacturing, the statistics bureau said.
“Chinese authorities will continue to guard against the inflation risk next year,” Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong, said in a note today. Investment spending and high food prices will help inflation “re-emerge” in the second half of next year, and the central bank will have to pay more attention to managing price expectations, Liu wrote.
The Politburo, in its first public assessment of the country’s development since a new generation of leaders took office last month, said the economy is stabilising and favourable factors are increasing, according to a report from the official Xinhua news agency on Tuesday.
Caterpillar, the world’s biggest construction and mining equipment maker, is seeing signs of recovery in China and expects economic growth to increase next year as the government focuses on rural migration to towns and cities, Chairman and Chief Executive Officer Doug Oberhelman said.
“I’m convinced we are going to see positive changes in the next few months,” Oberhelman said in an interview with Bloomberg Television on Thursday. “I’m pretty optimistic about China, not a big boom like we’ve seen, but slowly recovering.”
Consumer-price gains have slowed from a three-year high of 6.5 per cent in July last year and have stayed below the government’s target for this year of 4 per cent since February.
The pace of food-price gains accelerated for the first time in three months, increasing 3 per cent in November from a year earlier after a 1.8 per cent rise in October, today’s inflation report showed. The decline in pork prices moderated to 11.5 per cent in November from a year earlier, after a 15.8 per cent fall in October. They jumped 26.5 per cent in November last year.
Non-food inflation cooled to 1.6 per cent in November from a year earlier, while consumer-goods prices jumped 1.9 per cent, the most since August.
China’s gross domestic product may expand 7.7 per cent in the three months through December from a year earlier, according to the median estimate in a Bloomberg survey. Growth was 7.4 per cent in the third quarter, the least in three years. The government’s target for this year is for 7.5 per cent growth.