China’s Factory Output Grows Less-Than-Estimated 7.3%

By Kevin Hamlin

May 13 (Bloomberg) -- China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed.

Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.

The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while a slump in overseas shipments deepened in April, reports showed yesterday.

“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,” a senior economist at BNP Paribas SA in Beijing. “Domestic demand is resilient.”

Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.

The yuan traded at 6.8223 against the dollar as of 12:05 p.m. in Shanghai, from 6.8226 before the data was released. The Shanghai Composite Index of stocks rose 0.5 percent.

A decline in power output accelerated to 3.5 percent in April from 1.3 percent in March, the statistics bureau said. Growth slowed in the production of computers, mobile phones, iron, steel and 10 non-ferrous metals.

Cement, Automobiles

Output of automobiles, cement, air-conditioners and oil products grew more strongly.

Shanghai’s stock index has climbed 44 percent this year on optimism that the government can engineer an economic revival. New lending is already higher than the government’s targeted minimum of 5 trillion yuan for the year and money supply surged by a record last month, central bank data showed this week.

China’s vehicle sales have topped those in the U.S. this year. General Motors Corp. said its Chinese sales jumped last month to a record as government subsidies spurred demand.

“Data released this week displayed a vivid picture of a tug of war between sluggish external demand and robust domestic demand,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong. Inventory reductions may have played a role in weaker output growth, Lu said.

Money-supply growth tends to precede output gains by two quarters, suggesting production will strengthen in coming months, said Jing Ulrich, Hong Kong-based chairwoman of China equities at JPMorgan Chase & Co.

‘Solid Recovery’

The People’s Bank of China cautioned last week that the foundations for a recovery were not “solid,” with small businesses still lacking credit.

Economists were overly optimistic about April’s production because of gains in an official manufacturing index, which doesn’t adequately reflect small businesses, said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong.

“Unless the corporate sector picks up steam, the economy as a whole cannot be recovering on a sustainable basis,” Ma said.

China is battling a global recession that choked off export demand, dragging economic growth to 6.1 percent in the first quarter, the slowest pace in almost a decade. Overseas shipments declined 22.6 percent in April from a year earlier, the customs bureau said yesterday.

Today’s industrial-production number compares with a collapse in output growth to 3.8 percent in January and February combined and a 15.7 percent increase a year earlier.

To contact the reporters on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net