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Retail sales jump, factory output slows
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Robust consumer spending coupled with the government's stimulus plans to propel domestic spending helped boost retail sales during April, even as the industrial output growth slowed marginally in China.

Retail sales grew 14.8 percent in April after gaining 14.7 percent a month earlier, aided by the increased spending on automobiles and furniture, the National Bureau of Statistics said Wednesday.

Taking the 1.5 percent decline in the consumer price index into account, the retail sales in real terms could have accelerated to about 17 percent in April, the strongest since late 2008, a Morgan Stanley research note said.

However, economists have warned that such robust sales might not be sustainable, as the recovery in the world's third largest economy is yet to be fully established.

Shen Minggao, chief economist with the Chinese Caijing magazine, said if the economy fails to recover, it could lead to more unemployment and less income growth, putting further pressure on consumer spending.

"Incentive-driven demand may last only as long as the government tax breaks and subsidies remain in place," Jing Ulrich, chairwoman of China Equities at JPMorgan said.

Industrial output rose 7.3 percent in April, slower than the 8.3 percent growth in March, the NBS said yesterday. Though the figures fell short of market expectations, analysts said there is till no cause for concern yet.

"The April figure is more realistic in reflecting China's real economic scenario, as the growth rate in March was exaggerated by last year's low base due to the unexpected snowstorm," Sun Mingchun, chief China economist, Nomura International said.

Analysts said the deceleration in industrial output growth was largely due to weaker overseas demand and inventory adjustments in some industries. China's exports continued to slump in April, dropping 22.6 percent, steeper than the 17.1 percent decline a month earlier, the Customs said on Tuesday.

"Companies are loath to expand production when external demand is still uncertain," said Li Jianwei, senior economist with the Development Research Center.

Despite the uncertain external picture, analysts believe China's economic recovery has gained more momentum in the past few months with manufacturing activities likely to pick up. "We anticipate higher quarter-on-quarter industrial production growth going forward, considering that China's money supply growth tends to precede increasing industrial production by two quarters," Ulrich said.

(China Daily May 14, 2009)

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