Chinese industrial output and retail sales surged in October

Chinese industrial output and retail sales surged in October

11-12-2009 09:22

The Chinese retail sales and industrial production rose again in October and exceeded expectations, according to data by the National Bureau of Statistics of China. Domestic consumption remains a key engine for the Chinese economic improvement, while the demand for its exports is still weak.

Loose fiscal policy

However, producer and consumer prices dropped more than forecasts showed, driving rumors that the Chinese loose fiscal policy could be withdrawn within several months.
The central bank of the People's Republic of China released figures that demonstrated that banks' new loans declined last month, reaching their weakest level in 2009, indicating that regulators were reducing a main source of economic stimulus.

Chinese industrial output

The Chinese industrial production rose by 16.1% from the corresponding period of the previous year, exceeding the estimated rise of 15.5% in a FactSet Research survey, and climbing beyond September’s increase of 13.9%. Retail sales surged 16.2%, helped by the eight-day Golden Week holiday that boosted consumer spending.

Runs behind

Ben Simpfendorfer, chief China economist for the Royal Bank of Scotland, said: “Today’s figures prove the strong top-line economic expansion which also affects Forex. Nevertheless, the economic growth remains the result of heavy-industrial production boosted by large spending in infrastructure and in the automobile sector.”

“Nevertheless, the economic improvement is still unstable considering the weak demand for exports and a light-industrial sector that runs behind the strong industrial sector,” the chief China economist stated. China’s economic growth depends mainly on exports, which is a key engine for the Chinese employment. Chinese exports decreased by 13.8% and outpaced expectations, while the economy contracted by 15.2% in September.

Robust economic improvement

Chinese imports fell by 6.4% in October, which was considerably more than last year, pushing the Chinese trade surplus up to $23.99 billion, in comparison to last month’s $12.9 billion, reported the General Administration of Customs.
HSBC Global Research economists stated: “External trade remains weak, while domestic demand improves considerably. In our opinion, the robust economic improvement suggests an increased need for rebalancing monetary spending from infrastructure to education and health service spending, in order to stimulate consumption, as it also could lead to exports improving faster than estimated in 2010.”