China Industrial Output, Inflation Boost Easing Odds

China’s industrial production grew the least since 2009 in April, new yuan loans missed estimates and inflation was below target, boosting speculation Premier Wen Jiabao will take steps to stimulate the economy.

Output increased 9.3 percent from a year earlier, the biggest negative surprise against forecasts in two years, data compiled by Bloomberg show. Local-currency loans of 681.8 billion yuan ($108 billion) compared with the median economist estimate of 780 billion yuan. Consumer prices rose 3.4 percent from a year earlier, staying below the government’s annual goal for the third month.

The data show China’s slowdown is deepening after Wen’s campaign to rein in property and consumer prices reduced economic growth last quarter to the least in almost three years. India’s March industrial production unexpectedly contracted and Japan’s central bank pledged to provide emergency liquidity if needed as Europe’s debt woes sap global confidence.

“This set of data will definitely force the government’s hand to ease,” said Yao Wei, China economist for Societe Generale SA in Hong Kong. A cut in banks’ reserve-requirement ratios may happen “any minute now,” and “more fiscal easing is also highly likely,” Yao said.

China’s retail sales in April gained 14.1 percent from a year earlier, compared with estimates of 15.1 percent and March’s 15.2 percent increase. Fixed-asset investment excluding rural households rose 20.2 percent in the first four months of the year, compared with forecasts for a 20.5 percent gain.

M2, the broadest measure of money supply, rose 12.8 percent in April from a year earlier, the central bank said. Economists surveyed by Bloomberg estimated a 13.3 percent rise. New local-currency loans were 1.01 trillion yuan in March and 739.6 billion yuan a year earlier.

Stocks Fall

The benchmark Shanghai Composite Index fell 0.6 percent to close at the lowest level in two weeks.

A separate Ministry of Finance report today showed China’s April fiscal revenue rose 6.9 percent from a year earlier, compared with an 18.7 percent gain in March.

The People’s Bank of China has held off for almost three months in adding to the two reductions in banks’ reserve requirement ratio after the latest cut in February.

It is “really urgent to conduct more monetary easing and fiscal stimulus policy,” said Banny Lam, head of global economic research at CCB International Securities Ltd., a unit of China Construction Bank, one of the four biggest state-owned banks. Lam said he expects a 50-basis-point cut in banks’ reserve-requirement ratios before the end of May.

The central bank may lower the ratio this weekend or at latest by next weekend, said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai.

Inflation Target

Consumer-price inflation matched the median estimate in a Bloomberg News survey of 35 economists and compares with the government’s 4 percent annual goal.

The increase in food prices slowed to 7 percent last month from a year earlier, while costs fell 0.9 percent from the previous month, the statistics bureau said.

The producer-price index dropped 0.7 percent in April from a year earlier after declining 0.3 percent in March, the first back-to-back decline since 2009. Prices rose 0.2 percent in April from March, the report showed.

China needs to pay attention to upside price risks, the People’s Bank of China said in its first-quarter monetary policy report published yesterday. “Although overall price gains are staying on a moderating trend, they are not yet stable,” the central bank said.

The economy expanded 8.1 percent in the first three months from a year earlier, the fifth quarterly deceleration and the slowest pace in almost three years, as Wen’s crackdown on the property market cooled domestic demand and Europe’s debt crisis crimped overseas sales.

Trade Below Estimates

The nation’s exports and imports both rose less than estimated in April, a customs bureau report showed yesterday.

Elsewhere in Asia, India’s production at factories, utilities and mines declined 3.5 percent in March from a year earlier, the Central Statistical Office said in New Delhi today, compared with a 4.1 percent increase in February.

Gross domestic product in the 17-nation euro area will drop 0.3 percent this year, the European Commission said today, reiterating a February forecast.

In the U.S., producer prices in April were probably unchanged for a second straight month, with core wholesale prices gaining 0.2 percent from March after a 0.3 percent increase the previous month, a survey of economists showed.

Sany Forecast

Sany Heavy Industry Co., China’s biggest maker of excavators, may cut its unit-sales forecast for this year as government efforts to curb property speculation slow construction. “Given the weak market, I think there’s a need to adjust our sales target,” Xiang Ru’an, the company’s vice president, said in a May 5 phone interview.

China’s power output in April grew 0.7 percent from a year earlier, the slowest pace for a non-Lunar New Year month in almost three years. It increased 7.2 percent in March.

“To see the number so sharply down, I think the problem of macro issues comes into question,” said Michael Parker, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “It’s closely linked to the economy. This is certainly not a good sign.”