China’s Factory Output Tops Forecasts as Rebound Picks Up

China’s industrial output and retail sales exceeded forecasts last month while inflation rebounded from a 33-month low in signs the economic recovery is accelerating.

Factory production climbed 10.1 percent in November from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 9.8 percent median estimate of analysts surveyed by Bloomberg News. Retail sales growth accelerated to 14.9 percent, while the consumer price index rose 2 percent from a year earlier.

Today’s reports may reassure China’s new leadership under Communist Party chief Xi Jinping that growth in the world’s second-largest economy, which has slowed for seven quarters, will exceed the government’s target this year. The data may also reduce the odds of additional fiscal or monetary easing to support expansion.

“The Chinese economy is now in a sweet spot and can stay in the sweet spot” through the first half of 2013, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. “The current macro backdrop should bolster asset prices from equities to commodities.”

The nation’s benchmark stock gauge, the Shanghai Composite Index, rose 4.1 percent last week, the most in a year, on expectations the recovery will gather pace and as the ruling Politburo signaled an increased focus on urban development.

Trade Data

China’s customs administration will tomorrow release November trade data. Export growth probably cooled to 9 percent from a year earlier, according to the median estimate of 31 analysts in a Bloomberg News survey. Imports rose 2 percent, easing from a 2.4 percent pace the previous month.

The rise in retail sales compared with the 14.6 percent median estimate of analysts surveyed by Bloomberg News. Fixed- asset investment excluding rural households in the first 11 months of the year rose 20.7 percent, the same pace as in the January-October period. Economists had forecast a 20.9 percent gain.

Output of rolled steel rose 16.5 percent in November from a year earlier, up from an 11.7 percent pace in October, while electricity production increased the most since February, government data showed. Industries with accelerating growth included telecommunications and computers, ferrous metal smelting and pressing and general-purpose equipment, according to the statistics bureau.

“Growth is on track to rebound sharply” above 8 percent this quarter, said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. Inflation probably “bottomed in October and will likely rise further in December and 2013, as growth picks up and adds inflationary pressure,” Zhang said.

Inflation Forecast

Consumer inflation compared with the 2.1 percent median estimate in a Bloomberg News survey of 35 economists and a 1.7 percent gain in October. Producer prices fell 2.2 percent, the ninth straight drop, while the pace of the decline moderated for a second month. Deflation eased in costs for mining, raw materials and manufacturing, the statistics bureau said.

“Chinese authorities will continue to guard against the inflation risk in 2013,” Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note today. Investment spending and high food prices will help inflation “re-emerge” in the second half of 2013, and the central bank will have to pay more attention to managing price expectations, Liu wrote.

The Politburo, in its first public assessment of the country’s development since a new generation of leaders took office last month, said the economy is stabilizing and favorable factors are increasing, according to a report from the official Xinhua News Agency on Dec. 4.

Caterpillar CEO

Caterpillar Inc., the world’s biggest construction and mining equipment maker, is seeing signs of recovery in China and expects economic growth to increase next year as the government focuses on rural migration to towns and cities, Chairman and Chief Executive Officer Doug Oberhelman said.

“I’m convinced we are going to see positive changes in the next few months,” Oberhelman said in an interview with Bloomberg Television on Dec. 6. “I’m pretty optimistic about China, not a big boom like we’ve seen, but slowly recovering.”

Consumer-price gains have slowed from a three-year high of 6.5 percent in July last year and have stayed below the government’s 2012 target of 4 percent since February.

Food Prices

The pace of food-price gains accelerated for the first time in three months, increasing 3 percent in November from a year earlier after a 1.8 percent rise in October, today’s inflation report showed. The decline in pork prices moderated to 11.5 percent in November from a year earlier, after a 15.8 percent fall in October. They jumped 26.5 percent in November last year.

Non-food inflation cooled to 1.6 percent in November from a year earlier, while consumer-goods prices jumped 1.9 percent, the most since August.

China’s gross domestic product may expand 7.7 percent in the three months through December from a year earlier, according to the median estimate in a Bloomberg survey. Growth was 7.4 percent in the third quarter, the least in three years. The government’s 2012 target is for 7.5 percent growth.

--Zhou Xin, Zheng Lifei. With assistance from Regina Tan, Penny Peng and Jessica Zhou in Beijing, Janet Ong in Hong Kong and Ailing Tan in Singapore. Editors: Nerys Avery, Scott Lanman

To contact the reporter on this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net.

To contact the editor responsible for this story: Scott Lanman at slanman@bloomberg.net

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