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UPDATE 1-China May data shows growth steadying but recovery patchy
June 13, 2014 / 6:37 AM / 3 years ago

UPDATE 1-China May data shows growth steadying but recovery patchy

* May factory output +8.8 pct y/y vs f‘cast +8.8 pct

* Jan-May fixed-asset investment +17.2 pct y/y vs f‘cast +17.1 pct

* May retail sales +12.5 pct y/y vs 12.1 pct f‘cast

* Property investment slows, sales slump (Adds details, analyst quotes)

BEIJING, June 13 (Reuters) - China’s economy showed some signs of stabilising in May as the government unveiled more stimulus measures to avert a sharper slowdown, with retail sales logging their best performance of the year.

But signs of further deterioration in the property market indicate more policy support may still be needed to steady the world’s second-largest economy.

Factory output rose 8.8 percent in May from year earlier, in line with market expectations and quickening slightly from April’s 8.7 percent pace, the National Bureau of Statistics said on Friday.

Fixed-asset investment, an important driver of economic activity, grew 17.2 percent in the first five months of 2014 from the same period last year, ahead of forecast of 17.1 percent but weaker than the 17.3 percent pace in the first four months.

Retail sales, a key gauge of consumption, rose 12.5 percent in May from a year earlier -- the fastest pace since December and beating market expectations of 12.1 percent.

Taken together, data for May released over the past week point to an economy that is steadying thanks to increased government support. But the recovery appears patchy and analysts believe more policy support will be needed, especially if the cooling property market starts to deteriorate sharply and weighs more heavily on broader manufacturing activity.

“The slowing investment growth was mainly caused by the poor performance in property investment. Thanks to government efforts to quicken construction of infrastructure projects, it helped to hold up total investment,” said Tang Jianwei, economist at Bank of Communications in Shanghai.

“Both retail sales and industrial output figures showed some signs of improvement. Still, it’s too early to say that the economy is stabilising.”

Real estate investment rose 14.7 percent in the first five months of 2014 from a year earlier, while revenues from property sales dropped 8.5 percent. Both figures were weaker than those in January-April.

Real estate investment directly affects about 40 other business sectors in China from steel and cement to furniture, and is a crucial driver of economic activity.

Stimulus measures unveiled so far include speeding up the construction of railway projects and public housing, as well as orders to local governments to fast-forward their fiscal spending, while the central bank has eased monetary conditions by guiding market rates lower and cut reserve requirements for some banks.

Other data for May showed new bank lending and money supply rose faster than expected, while total fiscal spending by the central and local governments surged nearly 25 percent in May from a year earlier.

Exports grew modestly, but imports unexpectedly fell. (Reporting by China Economics Team; Editing by Kim Coghill)

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