Smaller rise in power usage points to weakness in China's economy

Power consumption on the mainland last month rose the least since February as slowing production and investment growth curbed demand.

The National Energy Administration said yesterday the mainland consumed 3.6 per cent more electricity, slowing from July's 4.5 per cent and sharply below the 9.1 per cent gain a year earlier.

In the first eight months, power consumption rose 5.1 per cent, against 11.9 per cent growth in the same period last year.

The data confirmed weakness in the world's second-largest economy. Economists increasingly use power consumption to gauge the strength of demand from various industries.

Joy Yang, the chief economist for greater China at Mirae Asset Securities, said slowing growth in electricity usage showed the economic downturn would continue.

Floods that hit about a dozen provinces might have also curbed demand for power, as some factories were forced to halt operations, Yang said.

"The deteriorating economic indicators will add pressure for the government to take steps. However, the political reshuffle may delay any action, given that the slowdown hasn't caused massive job losses," she said.

Monthly power consumption growth has stayed in single digits so far this year, except for a 22.9 per cent jump in February, which was distorted by the Lunar New Year holiday, which took place in February last year but occurred in January this year.

Investment banks including UBS, HSBC, Nomura and Barclays Capital recently trimmed their forecasts for the country's growth. Exports rose only 2.7 per cent last month, while imports unexpectedly fell. Industrial output expanded at the slowest pace since May 2009.

The pattern of power consumption, however, reflects gradually shifting and likely more favourable economic change.

Electricity use by the usually more energy-intensive heavy industries increased only 0.4 per cent last month, while power usage at light industries rose 4.2 per cent. The tertiary sector, including services and logistics, registered a robust 10.9 per cent growth.

Households consumed 11.7 per cent more power than a year earlier. The primary sector, such as agricultural, forestry, fishing, and mining industries, consumed 2 per cent less.

This article appeared in the South China Morning Post print edition as: Smaller rise in power consumption