China: Industrial production and retail sales slow – L’Express

Retail sales in the country last month rose 10.2% year on year, said Friday the National Statistics Bureau (BNS).

This is much less than the increase of 10.6% in June, well below the median forecast (+ 10.5%) of analysts surveyed by Bloomberg –and despite auto sales resistance.

This unexpected bout of weakness of household purchases in China came as Beijing intends to rebalance its growth model in favor of domestic consumption and services.

The services sector, driven notably by soaring internet sales now represent more than half of gross domestic product (GDP) of the Asian giant.

The persistent strength of retail sales, thanks to a continual credit easing, had also contributed to a surprise stabilizing China’s economic growth in the second quarter to 6.7 %.

Another disappointment on the face of industrial production: it was displayed in July rose 6% year on year according to the NBS, again slower than in June (+ 6.2% ) and below forecasts.

“ The economic dynamics still loses momentum, and floods ” that in June and July devastated several provinces in southern and central Somalia, “ have have exaggerated the trend “observed Yang Zhao, Nomura.

“ The floods have disrupted production in the economic belt of the Yangtze River “, abounds Louis Lam, ANZ Bank. And the authorities’ efforts to reduce industrial overcapacity should continue to put pressure on production in the second semester, he continued.

Steel -L’offre swells again-

China’s heavy industries are sealed by a gloomy demand –On exportations– of diving background, by colossal overcapacity production and a galloping debt, particularly in the steel industry.

However, to the dismay of European steelmakers who report dumping, the Chinese steel production continues to accelerate, with an increase of 2.6% year on year in July against only one, 7% in June.

“ Overall, economic development remains within an acceptable range, with solid gains “, but insists the SNB.

The economic transition initiated by China proves painful and chaotic, and structural reforms promised –Even skate if the SNB said on Friday that Beijing would “ move forward steadfastly “in this field.

Worse, multiplying monetary easing to stimulate activity, the authorities encouraged a surge in credit, which now results in an alarming rise in debt (to almost 250% of GDP in total ) and bad debts likely to undermine the financial system.

Budget -Relance accrue’-

Despite the nudges of the authorities, the traditional pillars of Chinese growth is crumbling.

Trade has still tumbled in July, with exports falling by 4.4% year on year and imports sinking for the 21st consecutive month.

Even the crucial real estate and construction, who had pulled himself together after a long cooling period, begins to stall: investments in real estate slowed sharply in July, according to the NBS, with up 5.3% year on year in the first seven months of 2016, against 6.1% for the entire first half.

Finally, investments in fixed assets –baromètre public expenditure in infrastructures– slow very sharply: they swelled 8.1% year on year in the first seven months of the year, against 9% throughout the first half.

Under these conditions, Nomura expects further monetary easing to support the economy, including a further reduction in interest rates by the end of 2016.

But “ numbers of fixed investment still raise the question of the effectiveness of this ever more accommodative monetary policy. the credit is gone but the investments (the real economy) remain limited ‘s ‘straying rather in speculative investments, tempered Julian Evans-Pritchard, the firm Capital Economics.

He said the government will therefore strengthen public expenditure “ as a fiscal stimulus stronger “, if he wants to halt the economic slowdown and achieve its growth target of at least 6.5% this year.