China July Industrial Output Shows Clear Signs of Slowdown

     BEIJING (MNI) - China's industrial output growth slowed sharply in July

following a sharp increase  in June, an indication that the country's economic

growth is slowing.

     Industrial output grew 6.4% on an annualized basis, well below the 7.6%

growth rate in June, while still above the 6.0% growth rate recorded in July

2016, the National Bureau of Statistics (NBS) said Monday. The July industrial

output growth rate was the lowest since the January-February period this year. 

     On a seasonally adjusted basis, industrial output increased 0.41%

month-on-month in July, below the rates of 0.81% in June and 0.51% in May, also

lower than the 0.52% rate last July.  The July growth rate was the lowest since

December 2015, matching that month's 0.41% increase. 

     For the January-July period, industrial output increased 6.8% on a

year-on-year basis, above the 6.0% increase during the same period last year.

     The National Bureau of Statistics (NBS) cited three reasons for the

slowdown in July industrial output growth: hot weather causing more factories to

shut down production temporarily; the effect of flooding in southern China; and

the impact of the government's continued drive to eliminate excess industrial

capacity. 

     "The steady to good momentum of China industry output will not change,

becausse the relationship between supply and demand will improve, the world

economy will continue to recover, producer price will remain generally stable,

and the capabilities for companies to make profits remain strong," Mao

Shengyong, a spokesman from NBS said in a press conference on Monday. "So the

conditions are there for industrial output to grow steadily."

     Some analysts agree with the NBS.

     "The industrial output situation is still better than last year, and the

steady-to-good economic conditions have not changed," Zhang Yiping, the analyst

at China Merchant Securities said on Monday. "It was overly-enthusiastic

sentiment in the  market that caused excessively high expectations which

belittles the growth of industrial output."  

     Still, industrial output may well have peaked in June, some analysts said.

     "The slow down of economic data in July reflects the fact that the peak of

the economy has passed," Deng Haiqing, the chief economist at Jiuzhou Securities

said. "The three forces that have strengthened the economy this year --

supply-side reforms, real estate investments and exports -- have all showed

signs of weakening."

     In July, manufacturing sector growth was 6.7% year-on-year, lower than the

8.0% gain in June and the 7.0% growth rate in July 2016.

     Mining sector output declined 1.3% year-on-year, down from the 0.1%

contraction in June while still higher than the 3.1% contraction posted last

July.

     Production in the electricity, heating, gas, and water production and

supply sector rose 9.8% compared with the same period last year, higher than the

7.3% growth rate in June and the 7.4% growth rate last July.

     Electricity production rose 8.6% year-on-year to 604.7 billion kilowatt

hours in July, compared with a 5.2% rise in June and a 7.2% growth last July.

     Crude steel production continued to post new record highs, hitting 74.02

million tons in July for year-on-year growth of 10.3%, up from 73.23 tons in

June, the previous record. The crude steel production grew 5.7% y/y in June and

2.6% y/y in July 2016.  

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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