China data highlights weak economy, remedies in focus

Sun Jun 9, 2013 4:52am EDT
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By Langi Chiang and Jonathan Standing

BEIJING (Reuters) - China's growth could slow further after data released on Sunday showed subdued activity right across the economy in May in the face of sustained global weakness, raising the possibility of interest rate cuts.

Evidence has mounted in recent weeks that China's economy is fast losing growth momentum, with sluggish domestic demand failing to make up for lethargic export sales as the country's main trading partners wrestle with their own slowdowns.

A raft of figures over the weekend added to that evidence, with exports in May posting the lowest growth in almost a year, inflation, growth in bank lending and investment below expectations and factory output and retail sales growing only about the same pace as in previous months.

"(The) activity numbers indicate continued expansion but growth remains unconvincing and the momentum seems to have lost pace in May," Louis Kuijs, an economist at RBS, said in a note.

"The short term growth outlook remains subject to risks and we may well end up revising down our growth forecast for 2013 further."

China's consumer inflation slowed to 2.1 percent, the lowest in three months, while producer prices fell 2.9 percent, the lowest since September. A Reuters poll had put inflation at 2.5 percent and factory-gate prices down 2.5 percent.

"The inflation data showed China's economic growth continued to slow down. Q2 growth is probably even slower than Q1. In particular, the PPI data showed very weak demand," said Jianguang Shen, chief China economist at Mizuho Securities Asia in Hong Kong.

Separate central bank data showed that Chinese banks lent 667.4 billion yuan ($109 billion) in new loans in May, missing market expectations of 850 billion yuan and lower than April's 792.9 billion yuan.   Continued...

A customer holds a child while shopping at a supermarket in Shenyang, Liaoning province, June 9, 2013. REUTERS/Stringer