China's November factory output jumps to 8-month high

Last Updated: Mon, Dec 10, 2012 03:51 hrs

pGrowth in China&rsquos factory output and retail sales jumped to eight-month highs in November as consumer inflation bounced off 33-month lows in the latest sign that its economy is snapping out of a protracted slumpppAnalysts said Sunday&rsquos data showed China is enjoying an enviable mix of benign inflation and rebounding economic growth that allows Beijing to stand still on monetary and fiscal policies or switch to an easier stance if neededpp&ldquoThe Chinese economy is now in a sweet spot and can stay in the sweet spot through the first half of 2013&rdquo said Ting Lu an economist at Bank of America-Merrill Lynch &ldquoBeijing will be happy to sustain the current policy stance&rdquoppData from the National Bureau of Statistics showed output from Chinese factories beat forecasts to climb 101 per cent in November from a year ago its best performance since MarchppAnnual growth in retail sales also surprised by jumping 149 per cent in November while fixed asset investment rose 207 per cent in the first 11 months of the year a shade below forecastsppThe batch of activity data came after an inflation report out earlier on Sunday showed China&rsquos consumer price index rose 2 per cent in November from a year ago &mdash just under forecasts for a 21 per cent gain &mdash as vegetable prices soaredppBut economists said the rise in consumer prices from near three-year lows was far from worrying especially since it is well under Beijing&rsquos annual four per cent inflation targetpp&ldquoWe expect consumer inflation to not see a big rebound until the first quarter of next year&rdquo said Jiang Chao an analyst at Guotai Junan Securities in Shanghaipp&ldquoTherefore the central bank may stick to its current policy stance and we see little chance of further policy loosening towards the year end&rdquoppChina&rsquos economy has slowed for seven consecutive quarters hurt by wilting export growth and lackluster domestic demand Growth hit a low of 74 per cent between July and September and is poised this year for its weakest annual showing since 1999ppBut things are looking up due in part to policy easing by the central bankppThe People&rsquos Bank of China cut interest rates twice in June and July and lowered banks&rsquo reserve requirement ratio RRR three times since late 2011 freeing an estimated 12 trillion yuan 193 billion for lendingpp&ldquoWe expect such economic recovery to be durable and will at least extend into the first half of next year though the pace of recovery will remain mild&rdquo said Sun Junwei an economist at HSBC in BeijingppAs growth revives the central bank is keeping an eagle eye on inflation its policy priority in normal timesppIt has not cut interest rates or RRR since July and has instead added short-term cash to the banking system through open market operations a move analysts say underlines its worries about consumer and property price inflationppAs China&rsquos economy breaks away from central planning and as wages rise on average at least 10 per cent each year the central bank has warned inflation will be the biggest long-term risk a point reiterated by Governor Zhou Xiaochuan last monthppIndeed November&rsquos data showed price momentum was gathering even in factoriesppFactory-gate prices fell 22 per cent in November from a year earlier its ninth straight month of declines but easing from October&rsquos 28 per cent annual drop boding well for firms struggling with falling profitsp

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