China economy slows for 7th quarter
Beijing, October 18, 2012
China's economy slowed for a seventh straight quarter in July-September, missing the government's target for the first time since the depths of the global financial crisis, but other data released on Thursday pointed to a year-end rebound.
The National Bureau of Statistics said GDP grew 7.4 percent in the third quarter from a year earlier - in line with forecasts from economists polled by Reuters - the first miss of the official target since the first quarter of 2009's 6.5 percent.
Industrial production, retail sales and investment data were all slightly ahead of forecasts, however, and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world's No.2 economy will pick up in the final quarter - as a once-a-decade leadership transition gets under way in Beijing.
"Growth this quarter should be back above 8 percent," said Kevin Lai, an economist at Daiwa, in Hong Kong. "The worst should be over. We are seeing better numbers in industrial production and retail sales."
Riskier assets reacted positively, with Asian shares outside Japan rising to a 7-month high, while the Australian dollar, sensitive to Chinese demand for industrial commodities, touched its highest in two weeks.
While GDP growth at 7.4 percent would be cause for joy in recession-stalked developed economies, it represents a sharp slowdown for China, where GDP grew 9.2 percent in 2011 and has averaged an annual rate near 10 percent for three decades.
Fixed-asset investment rose 20.5 percent in January-September from a year earlier, ahead of the 20.2 percent consensus forecast, although still down from around 25 percent seen for most of last year.
Consumption also quickened, with retail sales in September expanding by 14.2 percent year-on-year, ahead of the 13.2 percent forecast, which would have been unchanged from August.
Growth in factory output came in at 9.2 percent, slightly ahead of both the 9.0 percent forecast and August's 8.9 percent.
Real estate investment, which affects more than 40 other sectors from cement and steel to furniture, rose 15.4 percent in the first nine months of 2012 from a year earlier, slowing from an annual increase of 15.6 percent in January-August.
"The September data indicates economic momentum has picked up strongly compared with July and August," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
"New project investment picked up further in September, indicating infrastructure investment will continue to rise in coming months. This data set helps reinforce our view that growth will rebound visibly in Q4."
The government targets growth of 7.5 percent for the full year - reduced in 2012 from the previous 8 percent target - and the consensus forecast of economists polled by Reuters is that it will deliver on it, with an expansion of 7.7 percent.
Indeed, Premier Wen Jiabao was quoted by local media as saying on Wednesday that the economic situation in the third quarter was relatively good, and the government was confident of achieving its goal.
But the remorseless slowdown has confounded forecasters repeatedly this year, with the initial consensus call for growth to bottom in the first quarter being persistently beaten back to its present position of a trough in the third quarter followed by a mild uptick in the fourth quarter.
Some analysts cite electricity usage growth running at roughly half the average rate of the last five years as a manifest sign of economic malaise.
Others disagree. They say there is clear evidence that the financial system's liquidity taps have been opened wide and that fine-tuning policies - Beijing's mantra for a year now - are gaining traction.
The fine tuning includes two interest rate cuts, three cuts to the proportion of deposits banks must keep as reserves - freeing an estimated 1.2 trillion yuan ($190 billion) for lending - and approvals in the last month for infrastructure projects worth about $157 billion, although Beijing has not said explicitly where the money to fund them is coming from. - Reuters