China May data likely to show economy still wobbly

BEIJING Thu Jun 5, 2014 10:23am IST

Workers load bags of chemicals onto a ship for export at a port in Lianyungang, Jiangsu province, May 8, 2014. REUTERS/China Daily

Workers load bags of chemicals onto a ship for export at a port in Lianyungang, Jiangsu province, May 8, 2014.

Credit: Reuters/China Daily

Related Topics

BEIJING (Reuters) - Stronger foreign and domestic demand probably helped to stabilise China's economy in May, boosting growth in exports, factory production and retail sales, a Reuters poll showed.

However, a slight pick-up in parts of the world's second-biggest economy does not mean a solid, broader recovery is underway.

Investment -- an important driver of growth -- is forecast to slow further as China embraces sweeping financial reforms, and some market watchers believe a downturn in the housing sector may worsen in coming months.

Signs of only patchy improvement overall and a sharper deterioration in the property market would reinforce speculation that the government will loosen policy further to shore up the economy, following a series of modest measures in recent months.

"We think the government may have to relax property policies," said Wang Tao, an economist at UBS Bank in Hong Kong. "The ongoing property downturn is expected to create a bigger drag to the economy in the fourth quarter and in 2015."

Factory production is estimated to have risen 8.8 percent in May from a year ago, the median forecast of 22 analysts showed, edging up from April's 8.7 percent.

Retail sales likely rose 12.1 percent up only a shade from April's 11.9 percent.

Export growth, which whip saws from month to month but has steadily declined in the past four years, is expected to show the sharpest rebound by rising 6.6 percent in May, compared to April's scant 0.9 percent rise.

Imports are seen expanding 6.1 percent, up from April's 0.8 percent gain.

A rebound in trade would affirm the buoyant results of two separate surveys of China's factory sectors in the past week. Both polls indicated that manufacturers had their best performance in four or five months in May as foreign and domestic demand rose.

NO TURNAROUND YET

Yet a stronger trade performance may be offset by persistent weakness in investment, which accounted for a hefty 54 percent of China's annual economic growth last year.

Fixed asset investment is seen rising 17.1 percent between January and May compared to the same period last year, down from a 17.3 percent rise in the first four months of the year.

Mirroring the lethargy in capital spending, growth in credit and money supply is also believed to have flagged. The M2 money supply is seen up 13.1 percent in May compared to a year ago, down a touch from April's 13.2 percent rise.

The amount of new loans disbursed by banks is also estimated to have fallen to 750 billion yuan ($120 billion) last month, from April's 774 billion yuan.

In a sign of the times, producer prices are forecast to have dropped for the 27th consecutive in May by 1.5 percent, though annual consumer inflation is seen quickening to 2.4 percent, due partly to rising pork and egg prices.

"May is unlikely to be the month for a turnaround," economists at Daiwa Capital Markets said in a note.

"Moreover, the recent real estate market malaise makes us nervous about gross domestic product growth in 2014-15."

China's property market is grappling with a slowdown, hurt by less funding for developers and falling home sales following last year's upbeat performance.

Despite the moderation, Chinese home prices are still at record highs, but rising less quickly -- they rose 6.7 percent in April on an annual basis, the weakest pace in 11 months.

Trade data will be released on June 8, inflation on June 10 and industrial output, retail sales and urban investment on June 13. New loan and money supply data will be issued June 10-15.($1 = 6.2541 yuan)

(Reporting by Koh Gui Qing; Editing by Kim Coghill)

FILED UNDER:

REUTERS EXCLUSIVE

Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Ola's Expansion Drive

Ola's Expansion Drive

Taxi group Ola steps up expansion drive  Full Article 

Sahara Saga

Sahara Saga

Sahara's Grosvenor House hotel in London put up for sale   Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Beef Trade

Beef Trade

Maharashtra clamps down on beef trade through new act  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage