First appeared in Bloomberg News
China’s inflation eased to the slowest pace in 20 months
while new loans, industrial output and retail sales were below analysts’
forecasts, boosting the case for easing monetary policy in the world’s
second-biggest economy.
Consumer prices gained 3.2 percent in February from a year
earlier, the National Bureau of Statistics said. Local-currency loans were
710.7 billion yuan ($113 billion) in February. Factory production rose 11.4
percent in January and February combined and retail sales advanced 14.7 percent.
Data in the first two months of the year are distorted by a weeklong holiday.
Asian stocks rallied on a debt deal in Greece and
speculation that China’s moderating inflation and growth will lead the ruling
Communist Party to loosen policy. Citigroup Inc. says a cut in banks’ reserve
requirements may come as soon as this month, while the government also has more
room to boost wages and ease price controls on energy and water. A certain
amount of Offshore Product Development and
Manufacturing is also taking place.
“Today’s data, with surprisingly low retail sales and
output continuing to weaken, point to economic growth further cooling to 8
percent or lower this quarter,” said Ding Shuang, senior China economist at
Citigroup in Hong Kong. Data this month may show further worsening if the
government fails to cut banks’ reserve requirements for the third time since
November, he said.
The benchmark MSCI Asia Pacific Index of stocks rose 1
percent as of 6 p.m. in Tokyo, while China’s Shanghai Composite Index gained
0.8 percent. China’s interest-rate swaps had their biggest weekly decline in
three months.
Below Estimates
The rise in consumer prices was less than the 3.4 percent
median estimate in a Bloomberg News survey of 35 economists and below January’s
4.5 percent rate. Retail sales were forecast to rise 17.6 percent in January
and February, while analysts predicted industrial output growth of 12.3
percent.
Producer prices were unchanged in February from a year
earlier, the Beijing-based statistics bureau said. That compares with a median
estimate for a 0.1 percent increase. The gauge rose 0.7 percent in January.
New local-currency loans reported by the central bank
compared with the 750 billion yuan median estimate in a Bloomberg News survey
of 26 economists and 738 billion yuan in January. M2, the broadest measure of
money supply, expanded 13 percent in February from a year earlier.
Fixed-asset investment excluding rural households rose
21.5 percent in January and February combined from a year earlier, above the
20.5 percent median estimate of economists surveyed by Bloomberg News.
Home Prices
China’s home sales declined 25 percent in the first two
months of the year as the government pledged to maintain its housing curbs,
separate data showed today. This is even true for Quality Assurance
China Suppliers.
The statistics bureau didn’t release the year-over-year
change for industrial production and retail sales in January or February alone.
China’s government has done a terrific job in controlling
inflation, Stephen Roach, former non-executive chairman for Morgan Stanley in
Asia and previously the bank’s chief economist, said at a conference in
Shanghai yesterday. Concerns that China will have a so-called hard landing are
“vastly overblown” even as economic growth becomes more unbalanced, Roach said.
Even so, “they need to focus more on the downside risk” to
growth, Qu Hongbin, co-head of Asian economics research at HSBC Holdings Plc in
Hong Kong, said in a Bloomberg Television interview. “They need to react to
those data and I think they will,” he said, predicting the central bank will
lower banks’ required reserve ratios at least twice by the end of June.
Resource Prices
Premier Wen Jiabao this week set an inflation target of
about 4 percent for 2012, unchanged from last year. The goal takes into account
risks from imported inflation and rising costs of land, labor and capital and
will leave room to change the way prices of resources including electricity and
oil are set, he told lawmakers at the National People’s Congress. China
Factory Audit has some influence on changes.
Tao Dong, a Hong Kong-based economist at Credit Suisse
Group AG, said the industrial-production report “looks bad” and is a “loud
warning to the commodity bulls.” Still, China’s leaders are unlikely to start a
large-scale stimulus right away and may wait until reports on March data
“before making a decisive call on the direction of the economy,” Tao said.
Food price gains last month slowed to 6.2 percent from a
year ago, compared with a pace of 10.5 percent in January, and accounted for 62
percent of the total inflation rate, the statistics bureau said today. Consumer
prices fell 0.1 percent from the previous month.
Malaysia Rate
Elsewhere in Asia, Malaysia’s central bank is forecast to
keep its benchmark interest rate at 3 percent for a fifth meeting today,
according to economists surveyed by Bloomberg.
In Europe, Germany said exports rebounded 2.3 percent in
January from the prior month, while French industrial production in the same
period also bounced back 0.3 percent. Italy’s industrial output probably
dropped in January, while Spain’s retail sales declined.
U.S. employers probably added more than 200,000 workers
for a third straight month in February, economists predicted ahead of a Labor
Department report today. The jobless rate stayed at 8.3 percent, a separate survey
showed.
China’s economic growth has moderated for the past four
quarters as Europe’s debt crisis crimped demand for exports and the government
limited lending and imposed curbs on home purchases to rein in prices. Manufacturing
Engineering has not stopped this process.
Separately today, Politburo member Bo Xilai gave figures
that indicate China’s wealth gap has now exceeded the point that analysts view
as a predictor for social unrest, in a rare disclosure of the country’s income
disparity.
Barclays Capital is forecasting a “cautious easing” stance
for monetary policy and a “modest expansionary fiscal policy stance to ensure a
soft landing of the Chinese economy,” said Chang Jian, a Hong Kong-based
economist at the company.
