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    China Industrial Production, Retail Sales Worst Since Financial Crisis

     

    Chinese industrial production grew by the smallest annual amount since the financial crisis and investment and retail sales fell back to levels not seen in more than 10 years as  the government's economic stimulus measures show few signs of working.

    The expansion in industrial output fell to 6.8 percent annually in February, well under the 7.7 percent estimate from the Bloomberg survey of analysts and a substantial drop from 8.3 percent in January.  These are the lowest production figures since 6.3 percent in May 2009 and, except for the financial crisis, the lowest annual rate of growth since 1995 when the data begins.  

    Fixed asset investment declined to 13.9 percent year over year in February from 15.7 the month earlier, missing the 10.0 percent prediction for the weakest increase since December 2001. The February gain is little more than half the 15 year average annual increase of 24.4 percent. 

    Retails sales completed the triumvirate of underperforming statistics for February.  Sales grew at a 10.7 percent pace from a year earlier.  Economists had forecast a 11.6 percent rate. It was the lowest  increase since February 2004. 

    It was only a few years ago that the Chinese government said that 8 percent economic growth was necessary to maintain acceptable levels of employment.  Last week Premier Li Keqiang set the 2015 GDP target at 7 percent, the slowest n more than 15 years but these latest figures make even that reduced goal problematical.

    Bloomberg estimates that economic growth will slow to 6.28 percent in the first part of the year, the weakest pace since the start of 2009.

    A rapidly fading real state sector, which accounts for about 20 percent of GDP and has seen the value of property sales fall 15.8 percent in January and February, has reduced accessible wealth and curtailed investment and retail spending in the world's second largest economy.

    The People's Bank of China (PBOC) cut its benchmark deposit interest rate in November for the first time in two years and followed with a further reduction to 2.5 percent in February. The lending rate was dropped to 5.35 percent and reserve requirement were also reduced last month.

    The PBOC is expected to cut its deposit and lending rates in the second quarter to 2.25 percent and 5.10 percent respectively. 

     Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

    china ip march 11china invest march 11china retail sales march 11

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