‘Room to Maneuver’
The fundamentals of the economy remain sound with growth “within a reasonable range” even as the domestic expansion faces “downward pressures,” the government said, pledging to “maintain an appropriate level of investment.” Macroeconomic policies have “relatively large room to maneuver,” according to the statement, which didn’t repeat a pledge to maintain “prudent” monetary policy and “proactive” fiscal policy.
“More monetary easing will be needed to facilitate a controlled deceleration,” said Yao Wei, a Hong Kong-based economist at Societe Generale SA and the only analyst who correctly predicted the first-quarter figure. She said growth will slow to 7.8% this quarter and pick up to 8.1% in the third period.
The government has also slowed gains in the yuan to help cushion exporters against sluggish demand from developed countries. The currency is little changed against the U.S. dollar this year after a 4.7% rise in 2011. It was little changed today at 6.3030.
Industrial production increased 11.9% in March from a year earlier, up from an 11.4% gain in January and February combined, today’s statistics bureau report showed. Retail sales advanced 15.2% in March, compared with 14.7% in January and February.
Fixed-asset investment excluding rural households rose 20.9% in the first quarter, compared with the 21% median estimate of economists.
A separate report today from the Ministry of Finance showed China’s fiscal revenue grew 14.7% in the first three months combined compared with 33.1% a year earlier, while March revenue rose 18.7 percent. Fiscal spending in March climbed 34.7% from a year earlier.
“Growth will stabilize and recover modestly over the rest of the year,” said Brian Jackson, a Hong Kong-based economist with Royal Bank of Canada, who forecast an 8% rise in GDP. “External conditions look set to improve in coming months, and domestic growth should also get a boost as the impact of previous policy tightening fades and is replaced by the impact of more accommodative policy in recent months.”
Elsewhere in Asia today, the Bank of Korea kept borrowing costs unchanged for a 10th straight month after North Korea’s launch and as austerity measures in developed economies limit demand for exports. Governor Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25 percent.
In the U.S., the cost of living probably rose at a slower pace in March as the run-up in energy prices lost steam, economists said before a report today. The consumer-price index increased 0.3% last month after rising 0.4% in February, according to the median forecast of 80 economists surveyed by Bloomberg News.
In Europe, Italy reported a 0.7% drop in industrial production in February from January.
China has lowered banks’ required-reserve ratio twice since November to boost liquidity and spur loan growth. At the same time, authorities have refrained from cutting interest rates amid inflation concerns. The central bank may lower the ratio, currently 20.5% for large lenders, by another 100 basis points this quarter after two cuts since November, according to the median forecast in a Bloomberg survey last month.
“The economic growth slowdown is a natural result of the government’s moves to curb inflation and control the property market,” said Fan Jianping, Beijing-based chief economist at the State Information Center, a researcher under the government’s National Development and Reform Commission.
Sheng Laiyun, spokesman for China’s statistics bureau, said at a press conference today that “major economic indicators in March all improved from the previous two months” and he had “a lot of confidence in achieving relatively fast growth” this year.
Even so, he said that “great attention should be paid to some outstanding contradictions and problems” in the economy, including export growth and increasing operating difficulties at some companies.