MNI: China Oct Industrial Output Growth Misses Expectations

--But NBS Says Slowdown 'Within Reasonable Range'

     BEIJING (MNI) - Industrial output growth slowed in October following a

surge in September and came in slightly below market expectations, hinting at a

broader slowdown in China's economy during the final quarter of the year.

     Industrial output grew 6.2% on an annualized basis in October, below the

MNI survey median for 6.3% growth and also below the 6.6% growth rate in

September, the National Bureau of Statistics (NBS) said Tuesday. The October

industrial output growth rate was the second lowest this year, only above the

August growth rate of 6.0%.

     On a seasonally adjusted basis, industrial output increased 0.50%

month-on-month in October, the same as last October but below the rate of 0.56%

in September and above August's 0.46%.

     For the January-October period, industrial output increased 6.7% on a

year-on-year basis, the same as the January-September period.

     The NBS said that industrial output remained "stable" and that the growth

slowdown in October was normal.

     "It is true that many indicators fluctuated [downward] compared with last

month," NBS spokesperson Liu Aihua said on Tuesday. "However, if we observe the

trend in the longer term and compare this month's data with last year's or with

previous months, we can see the fluctuation is within a reasonable range."

     Liu also said the foundation supporting China's steady growth has

solidified, and that the country's economic growth will be stable next year.

     "The mid-Autumn Festival was in October this year, so fewer working days

than last year had a negative impact on industrial output growth," Zhang Yiping,

an analyst at China Merchant Securities, said in a report. "Moreover, as

environmental protection pressures were strengthened, production of heavy

industries like steel were affected, causing industrial output growth to

decline."

     Steel production fell to 91.79 million tons in October, lower than the

93.56 million tons of output in September and 1.6% lower than the same period

last year.

     In October, output of state-owned enterprises increased 6.6% year-on-year,

lower than 9.0% growth in September but higher than the 3.2% growth last

October.

     Manufacturing sector growth was 6.7% year-on-year, lower than the 8.1% gain

in September and the 6.8% growth rate in October 2016.

     "Lower export growth, which was 7.5% in October and 2.3 percentage points

lower than growth in September, has caused the manufacturing sector to grow

slower," Zhang said.

     Mining sector output declined 1.3% year-on-year, improving from the 3.8%

contraction in September and the 2.2% contraction posted last October.

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

supply sector rose 9.2% compared with the same period last year, higher than the

7.8% growth rate in September and the 7.9% growth rate last October.

     Primary aluminum production totaled 2.55 million tons in October, the

lowest since the NBS started to publish the data in 2016.

     The government's supply-side structural reforms were also reflected in the

output statistics. The production and sale of substandard steel products have

been banned, and 140 million tons of production capacity in substandard steel

has been eliminated.

     The debt-to-asset ratio of large state-owned industrial companies was 55.7%

as of October, compared with 56.3% in the same period last year, the NBS said.

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

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

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