China's industrial output growth beats forecasts

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China's industrial output growth beats forecasts

China's industrial output and retail sales grew faster than expected in August, but property investment fell further and could drag on broader demand, even as the recent flurry of support policies showed signs of stabilizing the economy.

Industrial output, released by the National Bureau of Statistics on Friday, rose 4.5 percent in August from a year earlier, accelerating from the 3.7 percent pace seen in July and came above expectations for a 3.9 percent increase in a Reuters poll of analysts. Retail sales, a measure of consumption, also increased at a faster 4.6 percent rate in August thanks to the summer travel season, and was the quickest growth since May. In July, it was compared with a 3. percent increase in July and a 3. percent increase in July.

The upbeat data suggests that an influx of recent measures, such as property support policies to shore up a faltering economic recovery, are beginning to bear fruit.

The yuan was up two-weekly high against the dollar, according to the data.

The recovery is far from sure-footed, analysts say, but analysts say it's far from sure-footed.

Friday's data was accompanied by a better-than-expected bank lending figure, narrowing in exports and imports as well as easing deflationary pressure.

Passenger vehicle sales also returned to growth in August from a year earlier, as more discounts and tax breaks for environmentally friendly and electric vehicles boosted consumer sentiment.

To maintain the momentum, China's central bank said it would reduce the amount of cash that banks must hold as reserve for the second time this year to boost liquidity. The bank also rolled over maturing medium-term policy loans earlier in the day to provide more liquidity to the financial system, while keeping the interest rate the same.

But analysts say that more fiscal and monetary policy steps are needed as an ailing property sector, high youth unemployment, uncertainty surrounding household consumption and rising Sino-US tensions over trade, technology and geopolitics have raised the bar for a sustainable economic recovery in the near future.

Ng said confidence remains the root of most problems requiring larger 'constructive policy and regulatory changes' to boost growth momentum.

The once mighty property sector is still a significant contributor to the $18 trillion economy, with the nation's largest private developer, Country Garden, the latest to fall due to a liquidity squeeze.

Property investment rose for August, down 19.1 percent from a 17.8 percent slump the previous month, according to Reuters calculations based on NBS data.

Moody's on Thursday reduced China's crisis-hit property sector's outlook to negative from stable, expecting contract sales to fall by about 5 percent over the next six to 12 months.

In the first eight months of 2023, fixed asset investment increased 3.2 percent from a year earlier, versus expectations for a 3.3 percent increase. The company grew 3.4 percent in the first seven months of the year.

An uncertain business climate meant companies were wary about hiring, but the national survey-based jobless rate increased a touch to 5.2 percent in August, slightly down from 5.3 percent in July.