China GDP Shows Pickup Signs After Seven-Quarter Slowdown

China’s industrial production, retail sales and fixed-asset investment accelerated in September, reducing the urgency for added stimulus to support the economy after a seven-quarter slowdown.

China’s industrial production, retail sales and fixed-asset investment accelerated in September, reducing the urgency for added stimulus to support the economy after a seven-quarter slowdown.

Gross domestic product expanded 7.4 percent in the third quarter from a year earlier, the National Bureau of Statistics said in Beijing today. That matched the median estimate in a Bloomberg News survey and compares with a previously reported 7.6 percent expansion in the second quarter. GDP rose 2.2 percent from the prior period, a four-quarter high.

Any rebound in growth may ease pressure on the Communist Party as officials begin a once-a-decade leadership transition next month. The government has paused for three months from easing monetary policy in the world’s second-biggest economy even as data showed trade, manufacturing and inflation cooled during the quarter.

China’s economy is performing better than expected, and the bottoming will be clear in the fourth quarter,” said Zhu Haibin, Hong Kong-based chief China economist for JPMorgan Chase & Co. The possibility of another interest-rate cut this year is getting “quite small,” though the central bank may cut lenders’ reserve requirements, Zhu said.

China’s economic growth has started to stabilize, Premier Wen Jiabao said in remarks published yesterday by the official Xinhua News agency. The government is confident of achieving annual targets and the economy will continue to show “positive changes,” Wen said, according to Xinhua. The State Council said today that it will maintain proactive fiscal and prudent monetary policies this year.

Stocks Rise

The Shanghai Composite Index, the country’s benchmark stock gauge, rose 1.3 percent at 2:15 p.m. local time. The index had slumped about 14 percent from this year’s high on March 2 on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough. The MSCI Asia Pacific Index (SHCOMP) of stocks gained 0.9 percent at 3:05 p.m. in Tokyo.

The economy expanded 7.7 percent in the first three quarters from a year earlier, the statistics bureau said. Wen set a full-year growth target of 7.5 percent in March, the lowest goal since 2004.

Industrial production increased 9.2 percent in September from a year earlier, rebounding from a three-year low of 8.9 percent expansion in August, today’s statistics bureau report showed. Economists surveyed by Bloomberg News forecast a 9 percent gain, based on the median estimate.

Retail sales advanced 14.2 percent in September from a year earlier, the most since March, compared with the 13.2 percent median estimate. Fixed-asset investment excluding rural households rose 20.5 percent in the first three quarters, higher than the 20.2 percent median forecast in a survey.

Moderate Rebound

“We can tentatively conclude that the economy is shifting from a state of slowing down to one of bottoming out,” Sheng Laiyun, a spokesman for the statistics bureau, said at a press briefing today. The economy will show a moderate rebound in the fourth quarter and the country’s employment situation was stable in the first nine months of the year, Sheng said.

Rio Tinto Group, the world’s third-biggest mining company, said last month it expects economic growth in China to accelerate toward the end of the year as the biggest global metals consumer eases credit restrictions and boosts spending. China generated 31 percent of Rio’s sales last year.

Even with the improvement, “I do not see China bouncing back quickly” because private investment is fleeing on rising labor costs and overcapacity, said Tao Dong, Credit Suisse Group AG’s Hong Kong-based head of Asia economics excluding Japan. “Public spending is no substitute to private investment and monetary easing cannot fix structural problems.”

Drink Sales

Coca-Cola Co., the world’s largest soft-drink maker, this week said volume sales growth in China of 2 percent in the third quarter trailed the 6 percent pace of the first three quarters combined. “It is reasonable to expect that China’s ongoing economic slowdown may have a short-term effect on our industry and on our business,” Chief Executive Officer Muhtar Kent said during a conference call.

Elsewhere in the Asia-Pacific region, Australian business confidence hovered near the lowest level in a year as falling commodity prices and a weaker mining boom weighed on the outlook for hiring and orders, a National Australia Bank Ltd. survey today showed.

In Europe, U.K. retail sales probably rose 0.4 percent last month from August, according to the median forecast of economists surveyed by Bloomberg News.

U.S. initial jobless claims in the week ended Oct. 13 rebounded to 365,000, according to the median of 49 economist estimates in a Bloomberg survey. The Conference Board will release its index of leading economic indicators for September today. The gauge rose 0.2 percent, according to the median estimate of analysts.

China Exports

Today’s data in China followed reports showing exports exceeded forecasts in September and money supply grew at the fastest pace in 15 months. Inflation last month was close to the slowest pace in two years and producer prices fell the most since 2009, government data showed on Oct. 15, giving authorities more room to ease policy.

China’s economy is expanding at a slower yet still “robust pace” and may grow 7.8 percent this year, central bank Deputy Governor Yi Gang said last week. The nation will keep taking steps to stabilize growth and has “relatively large room” to use monetary and fiscal policies compared with other countries, Yi said.

The People’s Bank of China has refrained from monetary easing since July after cutting interest rates twice in one month. The central bank lowered the reserve-requirement ratio for lenders three times from November to May to boost lending and support growth. At the same time, authorities have accelerated approvals for investment projects and rolled out tax support for exporters.

The Ministry of Railways increased its 2012 infrastructure spending plan to 516 billion yuan ($83 billion) from 496 billion yuan, according to a bond prospectus issued Oct. 10.

--Zheng Lifei. With assistance from Zhou Xin and Kevin Hamlin in Beijing, James Mayger in Tokyo, Ailing Tan in Singapore and Cynthia Li in Hong Kong. Editors: Scott Lanman, Nerys Avery

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