China’s economy strengthened in August, with a slew of data, from factory production to retail sales, beating estimates Tuesday. The improved performance is a fresh sign that stepped-up government spending and strong property sales are helping to stabilize growth in the world’s second-largest economy.
As for the numbers themselves, as reported by the government, industrial output rose 6.3% last month from a year earlier. Investment in buildings and other fixed assets outside rural households climbed a better-than-expected 8.1% year over year in the first eight months of 2016, while retail sales grew 10.6% in August from a year ago.
Economists generally cheered the numbers, but wondered how long the better times would last. Following are excerpts from economists’ views on the latest data, edited for length and style:Better-than-expected data out of China today raise hopes that policymakers’ efforts to reverse the slide in investment growth are seeing some success. Stronger industrial activity last month appears to have been partly driven by a recovery in investment spending, especially in the state sector. The delayed impact of earlier policy easing means that a stronger second half of this year is likely. The latest evidence of a pick-up suggests that recent concerns that policy easing had failed to provide any noticeable boost to the economy were likely somewhat premature. Julian Evans-Pritchard, Capital EconomicsToday’s data suggest that the downside risk for third quarter GDP is significantly reduced. Investment in manufacturing industry increased only 3% in Jan-Aug, while investment in services picked up to 11.2%, showing economic rebalancing continues to take place. The uptick in industrial output is consistent with the rebound in the August official manufacturing PMI. However, the divergence of PMI performance between large corporates and small- and medium-size enterprises remains a concern.
Louis Lam and David Qu, ANZ ResearchWe expect investment to remain under pressure for the rest of the year because of slower real estate construction and spare capacity in key sectors. But with industrial profits recovering recently, and investment also up in August, the downward pressure should diminish. Meanwhile, export momentum should improve along with global trade, while we expect consumption to hold up. In all, while further stimulus is necessary to reach the government’s GDP growth target of at least 6.5% this year, the outlook has improved slightly after the August data. Louis Kuijs, Oxford EconomicsChina needs to nurture an initial economic stabilization with continued fiscal support. Today’s data show economic growth seems to have stabilized a little last month, but it is not on a solid footing yet. Measures such as tax cuts and increased government spending can not only help spur growth but also help restructure the economy by boosting consumption. Fiscal expenditures rose 10% in August from a year earlier, much faster than July’s 0.3% increase. Liu Xuezhi, Bank of Communication
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