China economic data weaker than expected, fuels policy easing bets

Wed Mar 11, 2015 3:03am EDT
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By Koh Gui Qing and Kevin Yao

BEIJING (Reuters) - Growth in China's investment, retail sales and factory output all missed forecasts in January and February and fell to multi-year lows, leaving investors with little doubt that the economy is still losing steam and in need of further support measures.

The figures came a day after data showed deflationary pressures intensified in the factory sector in February, reinforcing expectations of more interest rate cuts and other policy loosening to avert a sharper slowdown in the world's second-largest economy.

"Activity data surprised the market on the downside by a large margin, suggesting that China’s first quarter GDP growth could likely fall to below 7 percent," ANZ economist Li-Gang Liu said in a research note.

"In our view, the extremely weak data at the beginning of the year suggest that China needs to engage in more aggressive policy easing, and we see that a reserve requirement ratio (RRR) cut will be imminent," he said, adding that stimulus measures rolled out since last year seem to have had limited effect.

Industrial output grew 6.8 percent in the first two months of the year compared with the same period a year ago, the National Bureau of Statistics said on Wednesday, the weakest expansion since the global financial crisis in late 2008.

Analysts polled by Reuters had forecast a 7.8 percent rise, down slightly from December.

Retail sales rose 10.7 percent, the lowest pace in a decade and missing expectations for a 11.7 percent rise.

Fixed-asset investment, a crucial driver of the Chinese economy, rose 13.9 percent, the weakest expansion since 2001 and compared with estimates for a 15 percent gain.   Continued...

An employee works at a garment factory, which exports products to Europe, in Hefei, Anhui province January 19, 2015. REUTERS/Stringer/Files