China's Industrial Output Sinks

[M.D. Holloway]

China's Industrial Output Sinks
By Joe McDonald, AP Business Writer
Manufacturing.Net - September 12, 2008


BEIJING (AP) -- China's industrial output growth rate fell to its lowest level in 18 months in August, adding to signs its rapid economic expansion faces a sharp downturn, according to data reported Friday.

The figures supported economists' forecasts that Chinese industrial activity has dropped in recent months. That could hurt government efforts to moderate a downturn in China's growth, which is raising the threat of job losses and possible social tensions.

The slowdown would hurt hopes the world's fourth-largest economy could fill the gap in global demand as American growth slows due to the U.S. credit crisis.

August's industrial output grew 12.8 percent over the same period last year, the National Burea of Statistics reported. That was 1.9 percentage points below July's growth rate and 4.7 percentage points below last August.

"The root problem is sluggish consumption in the Western economies," said Sherman Chan, a Moody's Economy.com analyst, in a report to clients.

"The housing crisis in the U.S. has triggered global credit market turmoil, and this has severely damaged business and consumer demand in China's largest export markets -- the U.S. and Europe," Chan said. "Although strengthening domestic consumption on the mainland has helped to support industrial production, overall output growth will not be as stunning as the previous year."

Analysts have cut forecasts of China's economic growth this year to as low as 9 percent, down from last year's stunning 11.9 percent. That still would be by far the highest growth for any major country. But Chinese leaders need high growth to reduce poverty and create jobs for millions of new workers entering the economy.

The government has given tax breaks to textile exporters and is expected to roll out other measures to help struggling industries.

Retail sales in August rose 23.2 percent over the same time last year, the statistics bureau said. It said that was 6.2 percentage points above last August's growth rate.

Chinese leaders are trying to encourage the country's consumers to spend more in order to reduce reliance on exports and investment to drive growth. But despite rapid growth, retail sales still lag China's huge export machine in sheer size.

Total retail spending in August was 876.8 billion yuan ($128 billion), according to the statistics bureau.

By contrast, China's exports in August were $134.9 billion, the government reported this week. That was up 21.1 percent from the same month last year, but that growth was a decline from July's 26.9 percent.

[Mule]

Now a worker only gets 4/5 of a bowl of rice a day.

[M.D. Holloway]

bump just because

[Neilk]

Did they factor any slowdowns due to the Olympics where they asked companies to idle their plants in hopes of cleaning the air? I am not sure if that had a big effect, but worth mentioning.