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China Industrial Production Growth Slowest In Nearly Two Decades

chinaeconomic march14 lt

China industrial production grew at the slowest pace in nearly two decades in the first two months of the year, retail sales gains were steady and property investment surged despite a fall in demand, suggesting that the economy is not out of the woods yet.

The government releases combined data for the first two months of the year to remove distortions caused by the change in the timing of the Lunar New Year holidays.

Industrial production rose 5.3 percent year-on-year in the January to February period, the National Bureau of Statistics said Thursday, which was less than the 5.6 percent gain economists had forecast.

The pace of growth was reportedly the weakest since 2002. In December, production grew 5.7 percent.

Removing the seasonal distortions, industrial output expanded 6.1 percent year-on-year in the two-month period, the NBS said.

Data also showed that retail sales growth remained near 15-year lows in the two-month period, at 8.2 percent year-on-year. Economists had forecast an 8 percent increase.

Recent figures showed that automobile sales remained particularly weak, falling for the eighth consecutive month in February.

Meanwhile, fixed asset investment rose 6.1 percent year-on-year in the January to February period, which was faster than December's 5.9 percent increase. Economists had predicted 6.2 percent increase.

Fixed investment growth was led by an 11.6 percent surge in property investment, the fastest in five years, while spending in manufacturing and infrastructure sectors slowed. However, home and land sales decreased.

The surveyed unemployment rate climbed to 5.3 percent in February from 4.9 percent in December.

Capital Economics said the latest data will ease concerns over a sharp slowdown at the start of the year, but the near-term outlook remained downbeat.

"The pullback in housing starts confirms earlier signs that developers have turned more cautious and that a slowdown in property construction is likely to weigh on growth in the coming months," Capital Economics economist Julian Evans-Pritchard said.

The slowdown in infrastructure investment suggests that fiscal loosening is still struggling to gain momentum, the economist noted.

"With credit growth yet to see a meaningful turnaround, we think economic growth will remain under pressure until at least the middle of this year," Evans-Pritchard added.

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