China's Jan-Feb economic activity cools to multi-year lows

Thu Mar 13, 2014 3:28am EDT
 
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BEIJING (Reuters) - China's economy slowed markedly in the first two months of the year, with growth in investment, retail sales and factory output all falling to multi-year lows, a surprisingly weak performance that raises the specter of a sharper cooldown.

The weaker-than-expected data is bound to amplify global investors' worries about slackening growth in the world's second-largest economy, and will almost certainly feed speculation that Beijing may loosen policies soon to bolster growth.

China's industrial output rose 8.6 percent in the first two months of 2014 from a year earlier, the National Bureau of Statistics said on Thursday, missing market expectations for a 9.5 percent rise.

That marked the worst performance for China's factory output growth since April 2009.

"Policy easing should be imminent," said Hao Zhou, an economist at ANZ Bank in Shanghai, adding that Thursday's data implied that China's economy may grow 7 percent in the first quarter.

Sources told Reuters earlier this week that China's central bank is prepared to take its strongest action since 2012 to loosen monetary policy if economic growth slows further, by cutting the amount of cash that banks must keep as reserves.

A cut would be triggered if growth slips below 7.5 percent and towards 7.0 percent, and would be expected only in the second quarter, according to the sources who are involved in internal policy discussions.

Other sectors of the economy also appeared to have lost steam.

Growth in retail sales was the slowest in three years, up 11.8 percent in January and February compared to the year-ago period. Analysts had expected a rise of 13.5 percent.   Continued...

 
A man walks at the financial district of Pudong in Shanghai March 11, 2014. REUTERS/Carlos Barria