* China Q1 GDP growth below f'cast at 8.1 pct vs 8.9 pct in
* March industrial output at 11.9 pct vs 11.5 pct forecast
* March retail sales at 15.2 pct vs 15.0 pct forecast
By Aileen Wang and Koh Gui Qing
BEIJING, April 13 China's economy grew at its
slowest in nearly three years in the first three months of 2012,
with a weaker than expected reading raising investor concerns
that a five-quarter long slide has not bottomed and that more
policy action would be needed to halt it.
The annual rate of GDP growth in the first quarter slowed to
8.1 percent from 8.9 percent in the previous three months, the
National Bureau of Statistics said on Friday, below the 8.3
percent consensus forecast of economists polled by Reuters.
The GDP data headlined a flurry of indicators published on
Friday showing March industrial output expanded 11.9 percent,
March retail sales rose 15.2 percent and quarterly fixed asset
investment, one of the principal drivers of China's economy,
grew 20.9 percent.
They were broadly in line with the conservative expectations
of investors who have grown concerned in recent weeks that the
bottom of China's economic cycle would extend into the second
quarter of the year as it struggles to escape its worst
sequential slowdown since the 2008/09 global financial crisis.
"What's clear is that the economy is still decelerating and
the property sector clearly is deflating," said Yao Wei, China
economist at Societe Generale in Hong Kong.
"Looking at the property data, it seems that property
investment has finally started to correct. I think this trend
will continue and will drag growth even lower in coming months
so we don't think this is the bottom yet. It means more monetary
easing will be needed to prevent a sharper deceleration."
Residential real estate investment in March grew at its
slowest annual rate since mid-2009, when policymakers in the
world's second-biggest economy were rolling out 4 trillion yuan
($635 billion) of stimulus to escape the grip of a financial
crisis that had driven global trade to a virtual halt.
Real estate investment was worth about 13 percent of China's
gross domestic product in 2011 and the sector directly affects
more than 40 industries, making Beijing's two year-long campaign
to curb rampant property speculation one that has been felt
across the economic spectrum.
"The reading of 8.1 percent is lower than expected, and
that's why Chinese Premier Wen has been urging policy
fine-tuning," Xu Biao, an economist at Industrial Securities in
"But Beijing is unlikely to roll out any big stimulus as a
growth rate of 8 percent won't hurt employment badly."
Growth of 8 percent is widely regarded as the threshold at
which China struggles to create enough jobs for new entrants to
its 800 million-strong workforce, raising the risk of social
instability that Beijing abhors and so increasing the likelihood
of stimulus measures being rolled out.
But as the government cut its official full year growth
forecast to 7.5 percent last month, there is a growing view that
Beijing's opinion of the pace that might constitute a hard
landing - which remains far from the market's consensus
expectation - has moved significantly lower.
That means money managers who anticipate a policy response
to a fall below 8 percent would be disappointed.
Economists polled by Reuters had forecast annual growth of
8.3 percent for the first quarter, with the 8.1 percent outcome
the lowest since the 8.1 percent seen in Q2 2009.
China's economy expanded by 9.2 percent in 2011, a two-year
low. Economists polled by Reuters expect growth in 2012 to ease
further to 8.4 percent, which would be its slackest since 2002.
The risk of sluggish global demand for China's exports
persisting into mid-year, with much of the euro zone seen in
recession and weak jobs data last week reviving concerns about
the strength of the U.S. economic recovery, is a red flag to
many in financial markets.
The euro and the Australian dollar eased after
the data wrongfooted traders positioned for a strong showing in
the wake of persistent overnight market talk of a positive
surprise. Brent crude oil slipped back towards $121 a
barrel and London Metal Exchange copper fell about 1
China's economic performance is widely read as a proxy for
global commodity demand and the strength of international trade.
"The main downside was with exports and some in terms of
consumption," Kevin Lai, an economist at Daiwa in Hong Kong,
"In general, I think the first quarter export results have
disappointed the consensus. We still believe there should be
more policy relaxation to add to growth domestically and offset
weakness in exports."
China's statistics agency said on Friday the country still
faced difficulties stabilising export growth.
REBOUND HOPED FOR
But March money supply data released on Thursday suggested
that a recovery might be gaining traction, with new loans made
in the month topping 1 trillion yuan ($158.55 billion) for the
first time since January 2011, coming in about 25 percent ahead
of expectations after two straight months of underperformance.
That data, coupled with a bounce in the index of China
leading indicators calculated by the Organisation for Economic
Cooperation and Development (OECD), leaves some economists more
confident that growth was likely to rebound in coming months.
The OECD leading indicator has successfully forecast
previous turning points in China's business cycle, meanwhile
quarter on quarter seasonally adjusted growth of 1.8 percent in
Q1 came in ahead of the 1.6 percent consensus.
"We are comfortable with our 8.6 percent annual GDP growth
forecast, and we expect year-on-year GDP growth to rebound to
8.5-8.6 percent in coming quarters. We don't think Beijing has
an appetite for higher growth because that will raise prices of
raw material imports and re-ignite inflation," Ting Lu, China
economist at Bank of America/Merrill Lynch in Hong Kong, said.
"With the strong new loans data and the rebound of
production in March, most investors will accept March is the
turning point, and we are now on the upturn of the cycle," he
wrote in a note to clients.