Factory output spurs Chinese economic growth

Indicates possible economic recovery as Communist party readies to install new leadership.

November 9, 2012   by The Canadian Press

BEIJING—China’s factory output and consumer spending improved in October, a sign of possible economic recovery as the Communist Party prepared to install a new generation of leaders.

Growth in factory output accelerated to 9.6% over a year earlier from the previous month’s 9.2%, the government reported Friday. Retail sales rose 14.5%, up from September’s 14.2%.

The data are welcome news for the ruling party, which is meeting in Beijing for a once-a-decade handover of power to younger leaders. Coming off the past year’s steady declines in economic activity, a rebound might allow the new leaders to benefit from improving public sentiment.

Investment growth strengthened, rising 25.2% over a year earlier, up from the previous month’s 25.1%.

Also in October, inflation eased further, giving Beijing more room to cut interest rates or launch new stimulus measures to speed a recovery with less danger of igniting politically dangerous price rises.

The improvement comes as communist leaders are holding a party congress in the capital that is expected to install Vice-President Xi Jinping as party leader and China’s next president.

Economic growth fell to a three and a half year low of 7.4% in the quarter ending in September but investment, retail sales and other indicators improved from the previous quarter. The government said last month it saw “steady economic growth,” suggesting there was no need for further major stimulus.

The slowdown was due largely to government efforts to crush inflation and prevent economic overheating after the huge stimulus in response to the 2008 global crisis fueled sharp price rises. Beijing reversed course late last year after global demand for Chinese goods plunged, slamming exporters and raising the danger of job losses and unrest.

The abrupt slowdown added to complications for communist leaders as they tried to enforce calm ahead of the leadership change.

Forecasters expect growth to rebound this quarter or early in 2013. They say any recovery is likely to be gradual and too weak to drive global growth without improvement in the United States and Europe.

Beijing launched a mini-stimulus early this year, cutting interest rates twice in June and July and stepping up investment by state companies and spending on building airports and other public works. But authorities avoided bigger measures after their huge spending in response to the 2008 global crisis fueled inflation and a wasteful building boom.

In October, consumer prices rose 1.7%, down from the previous month’s 1.9%. That was driven by a 1.8% gain in food prices, which are unusually sensitive in a society where the poorest families spend up to half their incomes to eat, down from September’s 2.5%.

©The Canadian Press

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