China's unsteady economy seen holding April inflation in check

Mon May 6, 2013 12:28am EDT
 
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BEIJING (Reuters) - Subdued factory and investment growth probably capped China's inflation in April and depressed producer prices for a 14th consecutive month, a Reuters poll showed, clouding the outlook for the Chinese economy.

And risks that China's factory and investment growth in April may miss even conservative forecasts are mounting after surveys of the country's manufacturing and services industries cooled unexpectedly last month.

A median for forecasts by 27 economists showed the annual consumer price index ran at 2.3 percent in April, up from 2.1 percent in March but comfortably below the central bank's 3 percent forecast for 2013.

Producer price deflation is forecast at 2.3 percent compared to a year ago, the deepest in six months.

Analysts from Barclays said China's struggling exports sector and its fragile domestic demand have added to the problem of capacity under-utilization, and dampened producer prices.

"The manufacturing sector will face continued pressures from the uncertain external outlook and the modest domestic recovery, and painful adjustments given over-investment and over-capacity," economists from Barclays said in a note.

China's factory output is expected to have grown 9.5 percent in April from a year ago, recovering slightly from a seven-month low hit in March. Fixed-asset investment is forecast to have expanded 21 percent in the first four months from a year earlier, up a shade from 20.9 percent between January and March.

But these estimates may prove optimistic.

Two separate surveys of Chinese factories showed growth slowed in April after new export orders fell, reinforcing doubts about the health of the world's second-biggest economy after its disappointing first quarter.   Continued...

 
Customers shop at a supermarket in Beijing April 8, 2013. REUTERS/Kim Kyung-Hoon