China industrial output accelerates

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    BEIJING- China’s industrial output accelerated the most in eight months in August, while retail sales grew for the first time this year, suggesting the economic recovery is gathering pace as demand starts to improve more broadly from the coronavirus crisis.

    An annual decline in fixed-asset investment over January-August also moderated due to government stimulus efforts.

    After the pandemic paralyzed huge swathes of the economy, China’s recovery has been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.

    “We think that China’s economic recovery is on a reasonably firm footing now and should continue through Q4 and into 2021, with solid investment growth, gradually recovering consumption momentum and resilient exports,” said Louis Kuijs at Oxford Economics.

    Industrial output growth quickened to 5.6 percent in August from a year earlier, the fastest gain in eight months, data from the National Statistics Bureau showed on Tuesday. Analysts polled by Reuters had expected a 5.1 percent rise from 4.8 percent in July.

    Retail sales also rose 0.5 percent on-year, snapping a seven-month downturn and beating analysts’ forecast for zero growth. It July, sales dropped 1.1 percent.

    Consumer confidence has been picking up lately, from spending on automobiles and duty-free shopping.

    Auto sales rose 11.8 percent in August from a year earlier while sales of telecoms products jumped 25.1 percent y/y, the data showed.

    Fixed-asset investment fell 0.3 percent in January-August from the same period last year, compared with a forecast 0.4 percent slide and a 1.6 percent decline in the first seven months of the year.

    Private sector fixed-asset investment, which accounts for 60 percent of total investment, fell 2.8 percent in January-August, compared with a 5.7 percent decline in the first seven months of the year.

    Recent economic indicators ranging from trade to producer prices and factory activity all suggested a further pick up in the industrial sector, and the broader economy.
    Government stimulus has been a powerful domestic driver, while momentum has also been supported by Beijing’s largely successful efforts to get the virus under control.

    “Fiscal and monetary policy stimulus should continue to support the recovery. But we expect the impact of policy stimulus to lose some punch with credit growth easing in Q4,” Oxford Economics’ Kuijs said.