China November industrial output growth slows to 10.0 per cent

PHOTO: China November industrial output growth slows to 10.0 per cent

BEIJING - China's industrial production growth slowed in November but retail sales expanded at a faster pace, official figures showed Tuesday, suggesting a mixed picture for the world's second-largest economy.

Industrial output, which measures production at factories, workshops and mines, rose 10.0 per cent in November year-on-year, the National Bureau of Statistics (NBS) announced.

That was a slowdown from the 10.3 per cent expansion recorded in October, but matched the median forecast of 11 economists surveyed by Dow Jones Newswires.

Retail sales, a key indicator of consumer spending, rose 13.7 per cent in November from the year before - an acceleration from the 13.3 per cent registered in October.

"Today's data could be either market neutral or slightly positive," Bank of America Merrill Lynch economists Lu Ting, Zhi Xiaojia and others wrote in a report.

They added the figures might raise expectations for stronger growth in the current fourth quarter, while "the structure of the economy seems to be improved towards consumption".

The data for November came after strong export and benign inflation figures for the month as China's economy - a driver of global and regional growth - shows signs of strength after a slump in the first half of the year.

Gross domestic product (GDP) expanded 7.8 per cent in July-September, snapping a two-quarter slowdown, with data for the final three months of the year so far suggesting a steady outlook.

Figures on Monday showed Chinese inflation slowed to 3.0 per cent in November, after two months of acceleration in consumer prices, well under the government's target for the year of 3.5 per cent.

"With a muted inflation and a pace of GDP growth in line with China's potential, we expect the government to maintain neutral monetary and fiscal policies in the next couple of quarters while increasing their efforts on drafting and carrying out structural reforms," the Bank of America Merrill Lynch economists wrote.

China's ruling Communist Party vowed last month to pursue a range of reforms, including encouraging a bigger role for the private sector, further interest rate liberalisation and loosened currency controls.

On Sunday, the General Administration of Customs said exports accelerated 12.7 per cent year-on-year in November while import growth weakened, fuelling the country's biggest trade surplus in nearly five years.

But the strong export figure led some economists to wonder whether companies had returned to over-invoicing their overseas sales to camouflage capital flows, a phenomenon seen earlier this year.

"The export growth according to (the) industrial survey only grew by 5.8 per cent, which reinforces our view that double digit export growth in November likely reflects to some extent capital flows disguised as trade flows," Nomura International economist Zhang Zhiwei said in an email Tuesday.

China's leaders say they are aiming to move the economy away from dependency on big ticket investment and want consumer demand to become the key growth engine.

Also Tuesday, the NBS said that fixed asset investment, a measure of government spending on infrastructure, expanded 19.9 per cent year on year in the first 11 months of 2013.

That compared with an increase of 20.1 per cent for the first 10 months, indicating a slowdown in growth.

Authorities are targeting 2013 growth of 7.5 per cent, the same as the objective set last year, with economist speculation increasingly focused on whether officials may lower it to seven per cent for 2014.

"We see two options for the government: keeping it at 7.5 per cent or cutting it to seven per cent, and believe that deciding between these two will be a close call," Nomura International's Zhang said in a report Tuesday.

China sees annual growth in the seven per cent range as being more sustainable for the future as the country's economy matures. As recently as 2010 GDP grew 10.4 per cent, and the following year it expanded 9.3 per cent.