China’s factory output weakest in three years

BEIJING - The Associated Press

Employees labor on an LCD television set assembly line in a factory in Shenyang, Liaoning Province, China. EPA photo

Growth in China’s factory production slowed to a three-year low in August, suggesting Beijing might need to launch more stimulus efforts to reverse a painful slowdown in the world’s second-largest economy.

Inflation climbed to 2 percent as food prices rose, and further increases could complicate efforts by the government to revive growth as Europe struggles with a debt crisis and the U.S. economy remains sluggish.

Growth in industrial production weakened to 8.9 percent from July’s 9.2 percent, according to National Bureau of Statistics figures released yesterday. August’s growth was the most anemic since May 2009, when factory production grew 8.9 percent.

“It’s clear that the stimulus measures that have been put in place thus far have not yet had an impact on growth,” said IHS Global Insight analyst Alistair Thornton. “So growth continues to slow, investment continues to weaken, the economy continues to go from worse to worse.”

The government has cut interest rates twice since the start of June, but authorities are moving cautiously after Beijing’s huge stimulus during the 2008 global crisis ignited inflation and a wasteful building boom. Growth slowed to a three-year low of 7.6 percent in the second quarter.

“The government doesn’t want to repeat the mistakes of four years ago,” but, given the pace of the slowdown, “they have to fall back on their tried and tested investment in infrastructure,” said Thornton.

Highlighting the government’s piecemal approach to stimulating the economy, it announced Thursday it had approved 25 subway building projects worth tens of billions of dollars.

Other data yesterday showed that a jump in food prices pushed inflation to 2 percent in August from 1.8 percent in July. Food prices rose 3.4 percent from a year earlier in August after a 2.4 percent increase in July.

 Retail sales growth for August inched up to 13.2 percent from the previous month’s 13.1 percent.
 Producer prices fell 3.5 percent year-on-year, compared with a 2.9 percent decline in July, which could help ease overall inflation pressures in coming months.