China growth risks in focus as first quarter data falls short

Mon Apr 15, 2013 1:59am EDT
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By Kevin Yao and Langi Chiang

BEIJING (Reuters) - China's economic recovery unexpectedly stumbled in the first three months of 2013 with slowing factory output and investment spending forcing analysts to start slashing full-year forecasts despite official insistence that the outlook was favorable.

The world's second-biggest economy grew 7.7 percent in the first quarter from a year ago, slower than 7.9 percent hit in Q4 2012, below the Reuters consensus forecast of 8.0 percent and confounding expectations of a surprise uptick that emerged after surging credit and export data were published last week.

"This number may well explain why there was so much liquidity support in Q1," Tim Condon, head of Asian economic research at ING in Singapore, told Reuters.

"Industrial production is unexpectedly weak and that's the source of weakness in GDP. Based on this, the consensus forecasts for GDP are going to be headed lower and we'll certainly be looking at ours," Condon added.

RBS duly obliged, cutting its full year forecast to 7.8 percent from 8.4 percent before the data.

"This is both due to the impact of the weaker start of 2013 and because the Q1 data shows slower quarter-on-quarter growth momentum than expected," Louis Kuijs, chief China economist at RBS in Hong Kong, wrote in a note to clients.

His observation on quarterly growth was shared by others equally concerned about quarter-on-quarter expansion easing to 1.6 percent in Q4 from 2.0 percent in Q4.

Sheng Laiyun, spokesman at the National Bureau of Statistics which released GDP in a flurry of other data on Monday, told a news conference that such worries were unfounded.   Continued...

An excavator is used to demolish a building near a residential complex in Zhengzhou, Henan province April 7, 2013. REUTERS/Barry Huang