China's Economy Holds Momentum as Output, Investment Accelerate

China’s Economy Holds Momentum as Output, Investment Accelerate

International News

China’s economy started the year on a firm footing as its old growth engines gathered pace. Key Points: Industrial production climbed 6.3 percent from year earlier in January and February combined, versus median estimate of 6.2 percent in Bloomberg economist survey. Retail sales advanced 9.5 percent in the first two months, missing economists forecasts, as auto sales dropped after a tax increase on small-engine cars. Fixed-asset investment increased 8.9 percent during the same period. Big Picture: Policy makers announced an expansion target of 6.5 percent or higher for the full-year and cut the M2 money supply goal to 12 percent from 13 percent in 2016. With the economy steady, they’re switching focus to reining in property prices and excessive leverage. Economist Takeaways: “The data pointed to a good start to the year. Fixed asset investment got a boost largely because of infrastructure projects. It shows that the proactive fiscal policy is playing out well,” said Tommy Xie, an economist at OCBC Bank in Singapore. “Infrastructure will be generally strong this year thanks to public-private partnerships. Credit data in February also showed that investment is getting adequate financial support.” “China’s economy is opening the year with a good start, although pro-growth policies to shore up consumption in coming months are needed,” said Gao Yuwei, a researcher at the Bank of China Ltd.’s Institute of International Finance in Beijing. “Auto sales have slowed to weigh on consumption after two years of splurging.” “The latest data support the slight tightening bias in People’s Bank of China policy,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. Strength in real estate sales and construction – if sustained – would mean upside risks to Bloomberg Intelligence Economics’ 6.3 percent growth forecast for the year. The Details: In a sign that the economy’s momentum is building, private fixed-asset investment accelerated to 6.7 percent growth from a year earlier in the first two months of 2017 Property development investment increased 8.9 percent in the period. The value of new homes sold rose 23 percent to 912 billion yuan ($132 billion). A reading of services output increased 8.2 percent in January and February. Automobile sales fell 1 percent from a year earlier, a breakdown of the retail sales numbers shows
Slower retail sales were due to the high base effect from car sales last year, an NBS spokesman said at a briefing in Beijing. Employment was stable in January and February and economic improvement continued with better fundamentals during the period, the spokesman said — With assistance by Xiaoqing Pi, Miao Han, and Yinan Zhao