BEIJING, June 11: China’s inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth that galvanised policymakers last week into taking their boldest action yet to combat a sharpening Slowdown.
A flurry of data over the weekend explained China’s surprise cut in interest rates on Thursday – its first since the global financial crisis – by showing the extent of the domestic economy’s weakness. The rate cut followed a number of measures designed to get money flowing back into the economy.
Beijing could offer more support if needed to combat risks from the euro zone debt crisis, which claimed Spain this weekend as the fourth country to seek financial support, and to promote stability in a year of leadership change, analysts said.
“Monetary policy should continue to lean towards loosening,” said Wang Jun, an economist at the government-backed think tank China Center for International Economic Exchange.
Premier Wen Jiabao and other policymakers appeared to be jolted by dire economic figures for April, released a month ago. In recent weeks they have approved languishing investment projects and launched a number of reforms to allow private investment into sectors previously dominated by the
state.
Thursday’s quarter point rate cut briefly lifted financial market sentiment, although that gave way to suspicions that the timing of the reduction meant May’s data would be worse than expected. The suspicions were right.
Industrial output rose 9.6 per cent in May from a year ago, below expectations and further entrenching concerns the
world’s second-largest economy faces its worst slowdown in years.
Retail sales were short of expectations, growing at their slowest pace since February 2011, while investment in the likes of real estate, infrastructure and factories increased at its weakest year-to-date pace in close to a decade.
Consumer price inflation eased to 3.0 percent, below expectations and the lowest level since the middle of 2010.
Producer prices fell 1.4 per cent from a year ago, marking the third straight month of producer price deflation.
“The slide in PPI… Points to considerable sluggishness in domestic manufacturing activity,” said Xianfang Ren,
economist at IHS Global in Beijing.
(agencies)
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