China industrial output climbs 8.8%, matching forecasts

China's industrial output matched analyst estimates, adding to evidence that Premier Li Keqiang's support measures are stabilising the economy.

Factory production rose 8.8 per cent in May from a year earlier, the National Bureau of Statistics said in Beijing on Friday, up from 8.7 per cent in April. Retail sales increased 12.5 per cent, boosted by faster inflation, and January-May fixed-asset investment climbed 17.2 per cent.

Friday's reports may bolster Chinese leaders' confidence that so-called mini-stimulus measures will prevent a deeper economic slowdown. Even so, policy makers are contending with a property market slump, and risks from shadow banking and rising bad loans that threaten to limit the scale of a recovery.

"The data confirms stabilisation of economic activity and even a modest improvement on the manufacturing side," said Dariusz Kowalczyk, senior economist at Credit Agricole SA in Hong Kong. "Unfortunately, home sales by area contracted sharply, highlighting continued weakness of the real-estate sector and the risks it poses to overall growth."

Home sales in the first five months fell 9.2 per cent from a year earlier by area and dropped 10.2 per cent by value, the statistics bureau said on Friday. Property investment in the January-to-May period rose 14.7 per cent, down from a 16.4 per cent pace in the first four months.

Stocks in China held their gains after the data. The benchmark Shanghai Composite Index was 0.8 per cent higher at 2:07 pm local time, set for the biggest weekly advance in two months.

Yuan gains
The yuan's spot rate climbed as much as 0.27 per cent on Friday to a two-month high of 6.2020. The central bank has strengthened the daily reference rate against the dollar by 0.2 per cent from June 6, the biggest weekly advance this year, a gain Bank of America Corp strategists say is consistent with the stabilisation in China's economic data.

The advance in retail sales compared with the median estimate of 12.1 per cent in a Bloomberg News survey and an 11.9 per cent gain the previous month.

The median analyst estimate for January-May fixed-asset investment excluding rural households was for a 17.2 per cent increase after a 17.3 per cent gain in the first four months.

The State Council has announced a series of measures to support the economy since April after first-quarter gross domestic product growth slowed to 7.4 per cent, the weakest pace since 2012. Premier Li has said he won't introduce aggressive stimulus to meet the government's 2014 growth target of about 7.5 per cent.

"China's policy easing has become significant from a macro perspective," Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong, said in a note after the data. "We continue to expect further easing measures in the next few months" that will lead economic growth to "rebound slightly" to 7.5 per cent in the third quarter from an estimated 7.4 per cent in the current three-month period, he said.