MNI DATA ANALYSIS: China Growth Beats Forecast on Ind Output

     BEIJING (MNI) - China's industrial output in March soared at the fastest in

more than four years while investment also gained, helping stabilize growth in

the first-quarter at 6.4%, beating the 6.3% median of a forecast surveyed by

MNI. 

     Industrial output jumped 8.5% y/y last month from the pace of 5.3% in the

first two months, data by the National Bureau of Statistics released on

Wednesday showed. That beat the forecast 6.0% projected by MNI. 

     Some analysts suspected that the surge may partly be caused by seasonal

swings. Most factories started production in March, earlier than last year's

seasonal start in April, as the Chinese New Year holiday came in about 10 days

earlier. A rollback in anti-smog curbs on production also helped to prop up the

output of crude steel, which climbed 10% y/y in March, compared with 9.2% in

Jan-Feb.

     Also, some producers might have increased production to boost inventories

so as to take advantage of lowered VATs, Mao Shengyong, the spokesman of the NBS

told reporters. While the pace of growth may not be sustained, China has the

condition to keep the growth steady and healthy, said Mao.

     --REACHED BOTTOM

     The economy has likely reached the "bottom" and is unlikely to perform

worse than in the first two months, Deng Haiqing, chief economist at Wallstreet

CN, wrote in a report.

     FAI quickened to 6.3% y/y in Q1 from 6.1% in the first two months, in line

with the 6.3% median in an MNI survey. The mild acceleration was supported by a

steady property investment gain, and a pickup in infrastructure spending which

offset a slowdown in manufacturing investment.

     Property investment in Q1 continued the 11.6% surge in the first two

months, up 11.8% y/y. 

     Home sales volume in the first quarter expanded 2.8 percentage points from

the first two months to 5.6%. Housing starts jumping to 11.9% from 6.0% in

Jan-Feb period. While that may underpin property investment growth in the short

term, falling land purchase prices may weight on the growth in the long term,

Guotai Junan Securities wrote in a report.

     Manufacturing investment further slowed to 4.6% y/y, compared with 5.9% in

Jan-Feb.

     --DEBT-FUELED INVESTMENT

     Infrastructure investment, expected rise and drive growth, added 0.1 pp

from the first two months to 4.4%. A faster pace of local government debt

issuance will likely further boost infrastructure spending to rebound

moderately.

     Retail sales beat MNI forecast of 8.3% forecast at 8.7% y/y from 8.2% in

the first two months despite a worse decline of auto sales in March. Auto sales

declined 4.4% in March, expanding the 2.8% loss in Jan-Feb period. A pace of 10%

growth in the sales of used cars, which numbered half of the new vehicle sales

last year, may help stem the worsening new vehicle sales, said Mao the

spokesman. 

     Housing-related consumption improved amid the home sales recovery

especially in first- and second-tier cites. The sales of home appliance,

furniture and construction and decoration materials rose 15.2%, 12.8% and 10.8%,

expanding 11.9, 12.1 and 4.2 percentage points from the first two months

respectively.

--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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