China's economic slowdown bottoming out, data seen showing

Wed Aug 8, 2012 5:17pm EDT
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By Kevin Yao

BEIJING (Reuters) - China's industrial output and fixed-asset investment are expected to show signs of picking up in data on Thursday, indicating that the economy is starting to stabilize after sliding for six straight quarters.

An expected drop in consumer inflation to a 30-month low will suggest the central bank has scope to ease monetary policy further after rate cuts in June and July to keep China's economy on track to meet an official 2012 growth target of 7.5 percent.

Still, any economic pickup will be fragile as the euro zone debt crisis and a sluggish U.S. recovery keep global growth at a low ebb, the main factor that pushed China's new export orders in July into their steepest fall in eight months.

"The recovery will be very modest -- more like stabilization and gradual improvement," said Yiping Huang, chief economist for emerging Asia at Barclays Capital in Hong Kong.

"Some further policy actions are needed to ensure gradual recovery of growth -- we start to see some improvements that really need to be consolidated and supported," he told Reuters.

China's industrial output growth is forecast to pick up to a four-month high of 9.8 percent year-on-year in July from 9.5 percent in June, a Reuters poll shows.

Annual growth in fixed-asset investment, in the likes of real estate, roads and bridges, is seen nudging up in January-to-July to 20.5 percent from January-to-June's 20.4 percent, as the government seeks to spur infrastructure investment.

Growth of retail sales, the biggest driver of the economy's expansion in the first quarter, is seen steady though at 13.7 percent.   Continued...

An employee pushes a car engine at a Geely Automobile assembly line in Cixi, Zhejiang province June 21, 2012. REUTERS/Carlos Barria