China Industrial Output, Retail Sales Growth Accelerate

(RTTNews) - China's industrial production and retail sales growth accelerated in May, suggesting that measures adopted by the government to kick start the recovery finally started to bear fruits.

Industrial production grew at a pace of 8.8 percent year-on-year in May, following April's 8.7 percent increase, figures from the National Bureau of Statistics showed Friday. The rate came in line with economists' expectations.

At the same time, retail sales advanced by a more-than-expected 12.5 percent annually in May, faster than the 11.9 percent rise seen a month ago. Sales were expected to rise by 12.1 percent.

During January to May, urban fixed asset investment grew 17.2 percent from the same period of last year and matched expectations.

Investment in the property market has shown signs of slowdown this year. Real estate investment during January to May logged a double-digit growth of 14.7 percent from the prior year. But the rate has slowed from 16.4 percent increase posted during January to April.

In the first quarter, China's economy grew 7.4 percent, the slowest pace in one-and-a-half years. The slowdown was attributed to weak external demand and property investment. The economy is struggling to meet the government's about 7.5 percent growth target.

Julian Evans-Pritchard, a China economist at Capital Economics, said today's output and spending data from China suggest that policymakers are being reasonably successful so far at fine-tuning policy in order to stabilize growth.

Although the downward pressures from the property sector may intensify, for now there is no pressing need for significant policy loosening, the economist noted.

The People's Bank of China this week said it will lower the reserve requirement ratio of banks focusing on farm sector lending.

Looking ahead, Evans-Pritchard expects policymakers to stick with this targeted approach, at least for the time being.

Data from the PBoC this week revealed that bank lending and money supply topped expectations in May. Banks provided CNY 870.8 billion loans in May, above a forecast of CNY 750 billion.

The broad M2 money supply surged 13.4 percent year-on-year, following a 13.2 percent rise in April and ahead of forecast of a 13.1 percent increase.