China's economy seen in mild downswing in November

Optimism that the world`s No. 2 economy is not sliding into a protracted downswing has been boosted by data in the past month showing activity stabilising as 2013 winds down.

Reuters| Updated: Dec 04, 2013, 13:54 PM IST

Beijing: China`s economy may have lost some momentum in November as inflation hugged its high for 2013, a Reuters poll showed, although analysts think any cooling will be mild and short lived due to signs of a revival in global growth.

Optimism that the world`s No. 2 economy is not sliding into a protracted downswing has been boosted by data in the past month showing activity stabilising as 2013 winds down.

Still, analysts expect that tighter credit supply and fading effects from the earlier government stimulus tempered activity last month. Unsteady global demand and a slower rebuilding of inventories by firms also hindered growth.

"Our estimates for the monthly indicators for November are not looking so hot," said Carl Weinberg from High Frequency Economics, who forecast a slowdown of annual growth rates for retail sales and factory output in October.

But all indicators point to a strong expansion in activity ahead, Weinberg said. "We see this as a brief slowdown, not the start of any downturn," he said.

Factory output growth is seen slipping to a four-month low of 10.1 percent in annual terms on November, the median forecast from 22 analysts showed, from October`s 10.3 percent.

Investment -- which accounted for 56 percent of economic growth in the first nine months -- is forecast to have risen 20 percent from a year earlier, a substantial rise but still the weakest increase in nearly 11 years.

Export growth, which has whipsawed this year, is seen quickening to a three-month high of 7.1 percent from a year earlier, up from October`s 5.6 percent and a sign that external demand may be improving.

An improving U.S. economy, China`s biggest export market, has also the brightened the outlook for 2014.

The annual inflation rate for November is forecast to be unchanged from October`s eight-month high of 3.2 percent due to elevated food prices, holding below the central bank`s 3.5 percent target for 2013.

SLOWER 2014?

Views that any moderation in activity would be temporary appeared to be supported by four separate purchasing managers` indices (PMIs) this week pointing to growth in the factory and services sectors.

But some analysts argue that a closer look showed the PMIs indicated softening demand with falling input prices and new orders, and that the economy may slow further in 2014.

"We believe that already the fourth quarter will see some slowdown," said Dariusz Kowalczyk, an economist at Credit Agricole CIB. "Gross domestic product growth will ease in annual terms from 7.7 percent in 2013 to 7.2 percent in 2014."

Indeed, a cooldown may be what authorities in Beijing want. Two influential Chinese think-tanks have suggested Beijing cut its 2014 growth target to 7 percent from 7.5 percent in 2013.

A lower growth target would give authorities more flexibility to push ahead with plans to reshape the economy into one driven by consumption at the expense of investment and exports, in the biggest policy overhaul in 30 years.

The government is expected to decide its 2014 economic growth target at this month`s Central Economic Work Conference, the date of which has not been announced.

November`s data releases will kick off on Dec 8, Sunday, with the trade report. Inflation data will be published on Dec 9 and activity indicators, including investment, factory output and retail sales, will be out on Dec 10.

Figures for money supply growth and new loans issued are due between Dec 10 and Dec 15.