MNI Analysis:China Consumption, Production Show Worse Downturn

     BEIJING (MNI) - China's growth in November showed more weakness with retail

sales dipping to the slowest level on record, industrial production at 10-year

low, even as fixed-asset investment(FAI) continued to expand, according to data

by the National Bureau of Statistics (NBS) on Friday.

     Retail Sales gained 8.1% y/y in November, down from October's 8.6%, missing

the median of 9.0% forecast in an MNI survey. This indicated that consumers

didn't seem to have the confidence to spend and the new tax deduction policy

kicked off in October hasn't made an impact.

     The sharp drop in November is mainly attributed to the declining auto

sales, as well as petroleum products reduced by lower gasoline and diesel

prices, said Mao Shengyong, the spokesman of NBS.

     Auto sales extended its decline for the fifth month, shrinking 10% y/y from

a year earlier. The growth of petroleum products registered 8.5% y/y, half the

level of October's 17.1%. These two items have dragged down the total retail

sales growth by more than 0.7 percentage point, Mao said.

     Online retail sales continued to grow strong. Online consumption totalled

CNY 8.069 trillion for the first 11 months, a rise of 24.1% y/y, compared with

the CNY7.054 trillion and 25.5% in the Jan-Oct period. The Double Eleven

e-commerce shopping festival helped growth but less than expected, said Mao.

     - STAGNANT INDUSTRIAL ACTIVITIES 

     Industrial output slipped to 5.4% y/y in November, hitting a 10-year low

and below the median of 5.9% projected by an MNI survey, down from October's

5.9%, signaling the economy could see more downward pressure.

     The cooldown of automobile, petrochemical, and IT industries weighed on the

total industrial production, according to Mao. In particular, auto production

saw a negative growth of 3.2% y/y, worse than October's -0.7%.

     Sluggish domestic demand, as well softer foreign demand amid the backdrop

of trade tensions and the slowdown of the global economy could further reduce

industrial growth.

     - STABILIZED INVESTMENT 

     FAI grew 5.9% in Jan-Nov, higher than 5.8% median in an MNI survey,

continuing to expand for the fourth consecutive month, driven by the uptick in

manufacturing, real estate and infrastructure investment.

     Manufacturing investment grew 9.5% y/y in the first 11 months, up 0.4

percentage point from Jan-Oct, indicating that the previous stimulus policies to

boost the private economy have gradually taken effect.

     Infrastructure investment growth stayed flat from Jan-Oct at 3.7%.

     Property investment grew 9.7% y/y, also flat from the gain seen in the

first 10 months. However, judging from the slowdown in land transactions in

recent months, real estate investment is expected to decline moderately in the

next year, Mao said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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