International | Dec 11 2009
By Chris Shaw
Having grown at 8.9% in the third quarter, the most recent data suggest the recovery in the Chinese economy continues to strengthen as a range of numbers released today came in better than economists had forecast. These include the Consumer Price Index (CPI), which for November recorded its first positive result in 10 months, and stronger than expected industrial production numbers.
China’s CPI rose 0.6% in November from year ago levels, likely reflecting higher prices across a range of products spanning food to property. The outcome was a reversal of the 0.5% fall in October and was slightly higher than the market had expected as the median forecast was for a gain of 0.5%.
In contrast the Producer Price Index fell by 2.1% in November from a year ago, which was its 12 consecutive monthly decline. On the plus side the fall was narrower than the 5.8% decline recorded in October and again was slightly better than the median forecast of a decline of 2.4%.
Industrial production was up 19.2% from year ago levels, well up from the 16.1% increase recorded in October and better than the median estimates of economists of an 18.2% gain. Bank of America Merrill Lynch suggested the results showed the benefits of the fiscal stimulus package the government had previously put in place, with results now good enough to allow the government to fine tune its stimulus measures as evidenced by changes to some subsidies and payments announced this week.
According to Bank of America Merrill Lynch, the fine-tuning shows the government is more comfortable with the sustainability of recovery, meaning it may look to end some measures relatively early in 2010.
Other data out today included retail sales up 15.8% in November from year ago levels, down from the 16.2% gain recorded in October, while new loans by banks hit 294.8 billion yuan. This brings the total of new loans for the year to 9.21 trillion yuan, though 2010 will see the government limit total new loans to between 7-8 trillion yuan next year in an attempt to avoid the formation of asset bubbles.
A bubble in the property market remains a threat as Chinese property prices rose at their fastest rate since July 2008 last month, residential and commercial real estate prices gaining by 5.7% in November against the 3.9% increase recorded in October. Even allowing for the new loan restrictions a lack of supply is seen as likely to push prices higher next year.