Chinese economy continues to sag

May 13, 2015 09:09 AM

WEAKENING INVESTMENT

Fixed-asset investment, a crucial driver of activity, rose 12% in January-April from a year earlier, the slowest pace since December 2000, the National Bureau of Statistics said.

A breakdown of the figures showed slower growth in both government and private sector spending, and a sharp drop in the mining sector. Overall spending on new projects stalled.

Property investment growth slowed to 6% in January to April from a year earlier, easing from 8.5% in the first quarter and the weakest level since 2009.

New property starts fell by 17.3% in January-April, hitting demand for everything from cement and steel to furniture and appliances. While home sales and prices may be bottoming out in big cities, analysts said high inventories of unsold houses are likely to prevent any meaningful recovery for some time.

"The property sector remains the biggest drag on the economy," said Nie Wen, an economist at Hwabao Trust in Shanghai.

"The chance of GDP growth bottoming out in the second quarter is small. We expect Q2 growth to be 6.7-6.8%," he said, adding activity should start to stabilize in the second half.

The latest data also suggested China's vaunted consumers are showing signs of spending fatigue. Retail sales rose 10% last month, missing expectations for a 10.5% rise and easing from March.

General Motors Co said on Tuesday it was cutting vehicle prices on 40 models in China after sales fell.

That spells more bad news for the PBOC, as strength in domestic demand and the services sector have been helping to offset persistent weakness and job shedding in manufacturing.

Other data last week showed weaker-than-expected exports, imports and inflation, highlighting that China's economy is under persistent pressure from softening demand at home and abroad.

"Today's data do not reflect the impact of easing (in mid-April and May). However, it is clear that economic activity has continued to decelerate and policymakers are likely still behind the curve," HSBC economist Julia Wang said in a research note.

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