China’s soft landing seems to be continuing, while the Japanese economy may be a touch stronger though than a month ago.
Chinese inflation rose in August, house prices again fell, industrial production was up a touch, exports down a bit, but imports up sharply, though iron ore exports fell to a seven month low.
All in all it was a good monthly report, especially for Australia.
The trade surplus was just over $US20 billion with exports up 34% on a year ago, and imports jumping 35%, compared with the 22% rate in July.
But compared with July imports rose 2.1% while exports fell 4.3%.
The jump in the value of imports was caused by higher prices (and higher volumes of some commodities, but not iron ore, which fell sharply. See next story).
Industrial production rose to an annual rate of 13.9%, compared with the 13.4% rate in the year to July.
That’s despite the closure of a number of old and heavy polluting industrial plants, such as steel, chemicals and coal mines.
The 3.5% rise in inflation won’t scare the markets, even though it was near a two year high and was the 10th monthly rise in consumer price pressures.
Producer prices, a more important measure often ignored by many western analysts, again eased last month, falling to the annual rate of 4.3%, down 0.5% from the annual rate for July.
The hot weather and then the very severe floods destroyed crops, driving up food prices and the impact is likely to continue until well into the northern autumn, and perhaps into early 2011.
As a result food prices were again the major driver, up 7.5%. These rises are expected to fall over the next six months as production and supplies return to normal.
China’s CPI rose 0.6% from July and for the first eight months; it was up 2.8% on the same time last year. A peak of 3.7% is expected this month or in October, before inflation starts easing, according to Government analysis.
China’s worst flooding in more than a decade has damaged food crops and disrupted transport across the country, driving up the price of fruit, vegetables and meat.
And, China said retail sales rose by an annual 18.4% in the year to August, up 0.5% from July’s rate.
Fixed asset investment in urban areas, a measure of government spending on infrastructure, rose 24.8% over the January-August period, slightly slower than the 24.9% rate in the first seven months of the year.
The statistics bureau brought forward the release of economic data by two days, triggering reports that the People’s Bank of China was planning to raise the benchmark deposit rate this weekend before financial markets reopen Monday.
On Friday figures released by the central bank showed new lending totalled 545.2 billion Yuan ($US80 billion) last month.
Chinese economists forecast China’s economic growth to slow to around 9% in the third quarter of the year and then 8% in the fourth quarter, which would be a substantial fall from the 11.9% in the first quarter (and 10.3% for the March quarter).
Part of the reason for sharp rise in imports is the continuing surge in car imports, up 140% (to more than 520,000) in the first eight months of the year compared with the same period of 2009.
According to the China Association of Automobile Manufacturers domestic auto makers’ sales to auto dealers rose 6.3% month on month to 1.322 million units in August after falling in July.
China’s trade with the European Union, the country’s largest trade partner, jumped 36% year on year to $US305.81 billion in the January-August period.
Trade with the US rose 32% to $US242.61 billion during the period, while that with Japan rose 35% to $US186.89 billion.
And Friday saw news that Japan’s economy slowed less than initially estimated in the second quarter.
The government said in its second estimate for second quarter growth that the economy grew at an annual 1.5%, not the original estimate of 0.4% which shocked the markets when released last month.
That’s a quarter on quarter growth rate of 0.4%, up from the first estimate of a tiny 0.1%.
Instead of being trimmed in the second estimate, as some quarterly figures were cut last year, this latest quarter saw business spending end up higher than first estimated.
The first quarter growth rate is now estimated at 5%, up from the earlier estimate of 4.4%.
Unadjusted changes in prices, GDP shrank 2.5% in the second quarter.
The revised real growth figure puts Japan’s expansion in line with the US, though nominal American GDP is rising because the country isn’t affected by deflation.
Japan’s economic output totalled $US1.295 trillion in the second quarter, less than China’s $US1.337 trillion.
The reason for the upgrade was a 1.5% rise in capital investment, compared with the estimated 0.5% rise in the first set of figures in August.
Net exports added 0.3% to growth in the latest estimate.
The GDP deflator, a measure of price trends, fell 1.7% from a year earlier, the fifth straight drop.
There’s as yet no sign of the yen’s recent appreciation to 15-year highs against the dollar having an impact on exports or the current account.
The high currency hurts Japanese exporters by cutting returns and also cuts the country’s huge income flows.
