China factory growth in August slows to near six year low
By Steel Guru , 2014-09-18 12:00:00
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Reuters reported that China’s factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world’s second largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the cooling housing market increasingly drags on other sectors from cement to steel and saps consumer confidence.
Industrial output rose 6.9% in August from a year earlier the lowest since 2008 when the economy was buffeted by the global financial crisis compared with expectations for 8.8% and slowing sharply from 9.0% in July.
Mr Xu Gao, chief economist at Everbright Securities in Beijing said that “The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won’t be small. The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates.”
Some analysts believe annual economic growth may be sliding towards 7% in the Q3 putting the government’s full year target of around 7.5% in jeopardy unless it takes more aggressive action. Experts reckon output growth of around 9% would be needed to attain such a goal.
Mr Liu Li Gang and Mr Zhou Hao at ANZ said that “Short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms. As such, we reckon that Chinese authorities should further relax monetary policy as soon as possible to prevent growth momentum from decelerating further.”
Mr Jiang Yuan, a senior statistician with the bureau, said that the dip in August factory growth was due to weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement and vehicles.
China’s economy got off to a weak start this year as Q1 growth cooled to an 18 month low of 7.4%. Beijing responded with a flurry of stimulus measures that pushed the pace up slightly to 7.5% in the Q2 but soft July and August data suggest the boost from those steps is rapidly waning
