Risks to China recovery seen as factory output underwhelms

Mon May 13, 2013 5:49am EDT
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By Koh Gui Qing and Kevin Yao

BEIJING (Reuters) - China's factory output growth was surprisingly feeble in April and fixed-asset investment slowed, rekindling concerns that a nascent recovery is stalling and adding to pressure on policymakers to take action to stimulate the economy.

However, China's already-easy monetary policy and rising home prices complicate the options available to Beijing's new leadership, leading some analysts to say that any response could be limited to fiscal measures.

Annual industrial output grew 9.3 percent last month, according to data released by the National Bureau of Statistics on Monday, up from a seven-month low hit in March but still missing market expectations for a 9.5 percent expansion.

"Economic activity remains weak," said Liang Youcai, a senior economist at the State Information Centre, a government think-tank.

"We now expect second-quarter gross domestic product growth of around 7.8-7.9 percent if there are no stimulus measures."

Monday's data dealt a further blow to investors' hopes for a decisive revival of the world's second-largest economy, following last month's announcement that growth unexpectedly cooled in the first quarter of the year to 7.7 percent.

Growth in fixed-asset investment, an important driver of China's economy, also disappointed in April. Investment rose 20.6 percent in the first four months from the same period a year ago, compared with expectations for a 21 percent rise.

Only retail sales met market expectations, growing 12.8 percent in April from a year ago.   Continued...

A worker wearing protective glasses welds steel products at a heavy equipment manufacturing factory in Luoyang, Henan province May 1, 2013. REUTERS/China Daily