China data shows growth steadying but recovery patchy

China’s economy showed some signs of stabilising in May as the government unveiled more stimulus measures to avert a sharper slowdown, with retail sales logging their best performance of the year.

But signs of further deterioration in the property market indicate more policy support may still be needed to steady the world’s second-largest economy.

Factory output rose 8.8 per cent in May from year earlier, in line with market expectations and quickening slightly from April's 8.7 per cent pace, the National Bureau of Statistics said on Friday.

Fixed-asset investment, an important driver of economic activity, grew 17.2 per cent in the first five months of 2014 from the same period last year, ahead of forecast of 17.1 per cent but weaker than the 17.3 per cent pace in the first four months.

Retail sales, a key gauge of consumption, rose 12.5 per cent in May from a year earlier -- the fastest pace since December and beating market expectations of 12.1 per cent.

Taken together, data for May released over the past week point to an economy that is steadying thanks to increased government support. But the recovery appears patchy and analysts believe more policy support will be needed, especially if the cooling property market starts to deteriorate sharply and weighs more heavily on broader manufacturing activity.

Real estate investment rose 14.7 per cent in the first five months of 2014 from a year earlier, while revenues from property sales dropped 8.5 per cent. Both figures were weaker than those in January-April.

Real estate investment directly affects about 40 other business sectors in China from steel and cement to furniture, and is a crucial driver of economic activity.

Stimulus measures unveiled so far include speeding up the construction of railway projects and public housing, as well as orders to local governments to fast-forward their fiscal spending, while the central bank has eased monetary conditions by guiding market rates lower and cut reserve requirements for some banks.

Other data for May showed new bank lending and money supply rose faster than expected, while total fiscal spending by the central and local governments surged nearly 25 per cent in May from a year earlier.

Exports grew modestly, but imports unexpectedly fell.

Reuters