China’s Early 1st Quarter Financial Reports Confirm Economic Slowdown
March 18, 2019
China’s economy continued to slow in the first two months of 2019 as the growth of industrial production fell to its lowest rate in a decade. Industrial production growth slowed to 5.3 per cent in January and February down from 5.7 per cent growth in December, according to data released by the National Bureau of Statistics (NBS).
The January and February output growth rate was the lowest since 5.1 per cent in March 2009. But of particular concern to the government was the sharp rise in the surveyed unemployment rate to 5.3 per cent in January and February from 4.9 per cent in December. The rate in the first two months of the year is the highest since hitting 5.4 per cent in February 2017, a month after the survey was first collected.
To smooth out the impact of the Lunar New Year holiday, which began on February 5 this year, 10 days earlier than last year, the NBS only released combined data for the first two months of the year. “The latest activity and spending data suggest that economic conditions remained weak at the start of 2019. The statistics bureau publishes combined data for the first two months of the year in order to iron out seasonal volatility caused by annual shifts in the timing of Chinese New Year,” said Julian Evans-Pritchard, senior China economist at Capital Economics.Retail sales rose 8.2 per cent in January and February compared to the same months in 2018, the same rate as in December. As in December, the January and February rate was the lowest since June 2003 and was in line with expectations in the Bloomberg survey. The stable growth rate may indicate subdued consumer spending at the start of the year as retail sales usually receive a boost during the Lunar New Year holiday,
period, a traditional gift-giving period. Fixed asset investment rose 6.1 per cent in the first two months of the year, accelerating modestly from the 5.9 per cent growth rate posted for all of 2018. The result was also in line with expectations. The rise in overall investment reflected a strong gain in the property sector, where investment jumped to 11.6 per cent in January and February from 9.5 per cent in December, reflecting in part a continued increase in government infrastructure investment.
But the overall property sector remained weak, with property sales growth plunging to 2.8 per cent in the first two months of the year from 12.2 per cent in December.
“At first glance, the bright spot in the data was fixed investment. This was driven by stronger property investment, which offset a slowdown in manufacturing and infrastructure investment,” added Evans-Pritchard. “However, the data on property investment are often distorted by land acquisition costs. And the more reliable data on real estate activity were more downbeat – property sales continued to contract and growth in floor space started dropped back sharply.” China’s economic growth has continued to slow at the start of 2019, due to the effects of the government’s deleveraging campaign to reduce debt and risky lending and the ongoing trade war with the United States. China overall growth rate dropped to 6.6 per cent last year, the slowest growth rate in 28 years. The government acknowledged the slowdown last week by setting a growth target range of between 6.0 per cent to 6.5 percent for this year, down from a previous target of 6.5%, with the new target range giving it leeway in the face of continued uncertainties about the domestic and global growth outlooks.