Slower growth data calls for further easing in China - HSBC

~~HONG KONG – China’s August growth data has surprised the market on the downside, with industrial production expansion slowing to the lowest level since December 2008. Both fixed asset investment and retail sales growth edged lower. HSBC says that, combined with lower-than-expected inflation numbers, this calls for further policy easing in the coming months to stabilise growth.

Industrial Production (IP) rose 6.9% on-year, much lower than market expectations and down from 9.0% in July. Sequentially, IP expanded by 0.2% on-month August, compared with 0.62% on-month in July.

By sector, the deceleration of output growth is broadly-based. Mining output growth decelerated from 6.2% in July to 4.2% on-year in August. Manufacturing output increase slowed to 8% on-year from 10% previously, while power generation and gas/water production contracted by 0.1% (1.9% in July).

By product, electricity output contracted by 2.2% on-year, the lowest since mid-2009, compared with an increase of 3.3% previously.

Fixed Asset Investment (FAI) grew 16.5%YTD, down from 17.0% in July.” This is weaker than market and our expectation of 16.8% growth,” says HSBC. “This implies that monthly FAI rose 13.3% on-year, the lowest since December 2011, compared with 15.6% on-year in July. Only newly-started project investments edged up, rising by 14.9% in August vs 14.6% in July.
 
“The FAI breakdown suggests that monthly property investment growth slowed further to 9.9% from 11.9% in July while manufacturing sector growth also moderated to 11% vs. 13.8% previously. Infrastructure investment decelerated to 16.3% from 21.6% in July. www.hsbc.com (ATI).