China factory output growth at three-year low
Annual growth in China’s factory output slowed to its weakest in more than three years in July, missing market forecasts and increasing expectations that Beijing will take further policy steps to support an economy that has been sliding for six straight quarters.
Official data released today also showed China’s annual consumer inflation fell to a 30-month low in July, suggesting that the central bank has ample scope to ease policy again after rate cuts in June and July to keep the economy on track to meet an official 2012 growth target of 7.5 per cent.
China’s economy faces powerful headwinds as the Eurozone debt crisis and a sluggish US recovery keep global growth at a low ebb, the main factor that pushed China’s new export orders in July into their steepest fall in eight months.
“The government underestimated the pace of slowdown and there needs to be more aggressive stimulating policies,” said Alistair Thornton, an economist at IHS Global Insight in Beijing.
“The government has signalled that it’s taking a more aggressive line on stimulus measures … But it’s yet to feed into the real economy, which is why we are seeing such weak activities data for July.”
Hopes of further easing from China boosted riskier assets, with Asian shares rising to a three-month high and the commodity-sensitive Australian dollar testing a 4-1/2-month peak.
China’s industrial output growth slowed to 9.2 per cent year-on-year in July, its weakest since May 2009, down from 9.5 per cent in June and below the 9.8 per cent forecast in a poll.