China’s official economic data in May indicates that growth in the world’s second biggest economy has slowed further.
May Industrial production moderated to 9.2% year-on-year in May, slightly down from 9.4% in April. Electricity production grew 4.1%, slower than April’s 6.2%. Fixed asset investment slowed to 20.4%, compared with 20.6% for the first four months of the year.
Credit expansion also slowed. New loans in May were RMB667 billion, much lower than April’s RMB793 billion. A broader measure — total social financing — was RMB1.19 trilion in May, down substantially from RMB1.75 trillion in April.
Inflation remained tepid in May. Consumer Price Index (CPI) was 2.1%, lower than market expectations. Producer Price Index (PPI) fell 2.9% in May, the 15th month when the measure was negative, indicating limited inflationary pressure in the near future.
Banks are split on whether China’s central bank will loosen policy to stimulate the economy.
Australia and New Zealand Banking Group (ANZ) forecasts that the People’s Bank of China will cut interest rate by 25 basis points, perhaps imminently. The call is based on weaker than expected economic data, as well as other central banks’ decisions to cut interest rate in the region.
Standard Chartered, however, sees little chance that China’s central bank will take any action because the jobs market is still relatively strong.
ANZ is also revising down China’s GDP growth to 7.6% this year and 7.8% next year.
