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China Economy Strengthens on Government Spending

China Economy Strengthens on Government SpendingChina Economy Strengthens on Government Spending

China’s economy picked up steam last month, boosted by government infrastructure spending and property sales that are helping to stabilize growth.

A slew of data points reported Tuesday—from factory output to retail sales—showed rebounding economic activity in August after a wobbly few months, economists said, MarketWatch reported.

Industrial output rose 6.3% last month from a year earlier, accelerating from 6% in July, the National Bureau of Statistics reported. The pace slightly exceeded a median growth forecast of 6.2% by 15 economists surveyed by The Wall Street Journal. Investment in buildings and other fixed assets outside rural households climbed a better-than-expected 8.1% from the previous year in the first eight months of 2016, matching the increase seen in the year’s first seven months. Retail sales grew 10.6% last month compared with a 10.2% increase in July, beating a median forecast for a 10.1% rise in August.

“There’s all good data from China. It looks like the economy has stabilized somewhat,” said Commerzbank AG economist Zhou Hao.

Zhou and other economists said the brighter picture should allow the central bank to hold off on cutting interest rates and other forceful monetary easing. Such measures, while helpful to growth, could also fan speculation in the already hot property and bond markets and exacerbate debt and overcapacity problems. Government spending on infrastructure and rising property sales in major cities helped lift August’s better-than-expected industrial production figures, economists said. Housing sales moderated, though still rose 25.6% in the first eight months of the year from the same period a year earlier, the statistics bureau said Tuesday, compared with 41.2% growth for the first seven months.

The cement, coal and steel sectors last month have all benefited from the robust spending on infrastructure and housing.

While the August data put China on course to hit its 6.5% to 7% growth target for the year, momentum is expected to weaken in the fourth quarter as property and infrastructure spending lose steam. Property investment and construction starts both expanded at a slower pace in the first eight months of the year than in the first seven months.

“Economic growth seems to have stabilized a little last month but is not on a solid footing yet,” said Bank of Communications Co. economist Liu Xuezhi. He adds that more fiscal support is needed to keep the economy on track over the near term.

 

Financialtribune.com