Showing posts with label slows. Show all posts
Showing posts with label slows. Show all posts

Thursday, July 14, 2011

China's growth rate slows to 9.5%

13 July 2011 Last updated at 09:31 GMT The government's attempts to rein in growth and rising prices are likely to slowdown China's growth rate

China's economic growth has slowed further in the second quarter after the government stepped up its battle against inflation.

Growth was 9.5% in the three months to the end of June compared with a year earlier. That is down from 9.7% in the previous quarter.

China says controlling prices is its top priority after inflation hit a three-year high in June.

However, other data on Wednesday showed it may be tough to slow growth further.

China's factory output grew by a better-than-expected 15% in June, while retail sales surged by 17.7%.

Analysts say further tightening measures are likely before the year is over.

Monetary measures

China has already raised interest rates three times this year, with the most recent increase coming last week.

"With inflation hitting a new three-year high in June, further monetary measures look likely," said George Worthington, an economist at IFR in Sydney.

He added that the current central bank interest rate of 6.56% could rise another 50 basis points by the end of September.

Sheng Laiyun, a spokesperson for China's statistics bureau said the government's policies would be "targeted, flexible and effective" to ensure the target to inflation under control is met.

"It's not easy and China has done a great job to maintain fast economic growth when the global situation is complex and volatile," he said.

The prospect of China's economic growth slowing has raised worries over how this might affect the world's other main economies.

However, IFR's Mr Worthington downplayed these concerns.

Wednesday's "data should also help to dispel the wilder fears of an economic collapse in China as a result of the anti-inflation fight", he said.

Stability

Despite the slowdown, China's growth rate remains one of the quickest in Asia, and the country is cementing its position as the world's second-biggest economy.

However, strong domestic demand and global problems with food production have led to an increase in the cost of food and other essential commodities, such as fuel.

Consumer buying vegetables in China The surging cost of food and fuel has become a threat to China's economic growth

This, in turn, has led to the occasional outbreak of unrest, something that the government is keen to control and limit.

Some analysts say that a slowdown in the growth rate is something China will have to accept if it wants a stable political and pricing environment.

"The biggest problem for China is not growth deceleration, it is inflation," said Chris Leung, senior economist at DBS Bank in Hong Kong.

"So in order to solve inflation, growth will have to slow down."

Credit-led growth

China's rapid expansion in recent times has been fuelled by a credit boom in the country.

As the world economies grappled with the global financial crisis, Chinese banks lent out record sums of money in an attempt to ensure that the country's high growth rate continued.

However, analysts said while the easy availability of cash had fuelled growth, it had also created issues for the government.

"You have to look at what's driving growth in China, it's mainly investments," said Patrick Chovanec, an associate professor at Tsinghua University in Beijing.

"This investment is being financed by expanding the money supply, which is fuelling inflation," he added.

Analysts also said that given the huge amount of loans that had been extended by the Chinese banks, there were concerns about asset bubbles being formed in the country.

"A lot of the investment that is going out, there is a real question being raised about whether it is going to generate return and a lot of it has started to show up as bad debt in the banking system," Prof Chovanec said.

He warned that the current path of growth in China was unsustainable.

"What we are seeing is not necessarily a strong economy, it's an economy that has been pumped up on steroids," he said.

However, Prof Chovanec said that despite the government efforts to rein in growth, a lot of people China wanted the credit-led growth to continue.

"There is a tug-of-war between those who say keep lending and let growth continue, versus those who are more concerned about inflation and want to rein it in," he said.


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Wednesday, June 8, 2011

Eurozone services growth slows

3 June 2011 Last updated at 09:54 GMT Euro coins The service sectors in core economies performed better than those in peripheral countries, Markit said Growth in the eurozone services sector slowed slightly in May, while business confidence fell to its lowest level in a year-and-a-half, a survey suggests.

The closely-watched Markit PMI Services index fell to 56.0 from 56.7 in April. Any reading above 50 indicates growth.

However, the rate of job creation increased slightly, Markit said.

France and Germany continued to drive the longer-term recovery in the sector, while Italy, Spain and the Irish Republic saw limited growth, it added.

France recorded "by far the strongest" increase in business activity with the rate of growth only slightly lower than April's figure, which was a 10-year high. Germany also reported "robust" growth.

But outside these two economies "the trend was much weaker", Markit said.

Two-speed recovery

Business expectations for activity in one year's time also fell to their lowest level since November 2009.

This reflected less new business and concerns about the wider economic outlook.

The fall in confidence meant the rate of growth in the service sector was likely to slip further in the coming months, Markit said.

"The first quarter may well therefore be as good as it gets this year," said Chris Williamson, chief economist at the research group.

"Growth disparities between the core and the periphery are a growing concern, as deficit-fighting austerity measures hit domestic demand in the debt-laden periphery, leaving service providers particularly exposed."

However, he said despite the slowdown, the eurozone service sector remained "robust" and should make a "significant contribution" to overall economic growth in the current quarter.


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