Another test of China’s economy and for the belief the shorting bears in the west who see nothing but the negative.
Trade figures for May are due later today, with the important inflation, industrial production, retail sales and investment figures on Tuesday.
Car sales figures for May revealed another weak month.
The two monthly manufacturing activity surveys showed another easing in the pace of expansion in May, but it was nowhere near as great as in the US or parts of Europe.
In fact some analysts believe China is approaching the end of the soft landing, but others are looking for a rate rise if the inflation figures show a sharper than expected rise.
Surveys put the CPI at an annual 5.4% in May, up from 5.3% in April and the same as in March.
Some economists, such as those at Goldman Sachs, say the CPI will be 5.5%.
China’s consumer inflation will increase in May, driven by higher food prices and a lower comparison basis with last year.
Pork prices have been rising steadily since early May, as demand increased during the recent Dragon Boat Festival holiday.
Vegetable prices have also risen by nearly 20%, according to data from the National Bureau of Statistics.
Food prices were up a sharp 11.5 % (annual) in April, despite suggestions in state media that prices had eased in April.
There have been four interest rate rises since last October and the Reserve Ratio for commercial banks has been lifted five times this year to a record high of 21%.
The credit restrictions seem to be having an impact on car sales in China.
Car production hit 1.389 million in April with sales at 1.382 million, both down sharply from April when production was 1.53 million and sales 1.55 million.
Output in the first five months of this year rose 3.2% and sales were up 4%, a long way from the 32% jump a year ago.
The China Passenger Car Association said the weakness was due to higher petrol prices and parking fees, stricter purchasing rules and the impact on vehicle production of the March earthquake in Japan.
That saw Honda for example; report a 32% slump in car sales in May from May of last year.
Sales were down sharply from April and sales for the first five months of this year were 9% down on the same period of 2010.
In contrast, Ford reported a 12% rise in its Chinese sales from a year ago.
The fall in May from April marked the second month in a row of weak sales, and April saw a fall from April of last year and was the first down month for car sales in two years.
That weakness no doubt explains the announcement on Wednesday night of a new government car subsidy scheme.
Chinese ministries announced Wednesday the details of the country’s new cash-for-vehicles program, which will allow automobile owners to receive up to 18,000 Yuan ($2,769) for scrapping their unused vehicles this year.
Rather than subsidising the purchase of a new car as the previous scheme in 2010 did, this is a car scrapping scheme.
Motorists will receive a state subsidy worth between 11,000 and 18,000 Yuan if their vehicles are registered to be scrapped in 2011, according to statement from the Ministries of Commerce and Finance.
In Japan, no change in the 0.9% quarter on quarter slide in the economy in the second estimate of March quarter GDP released yesterday.
But there was a small cut in the annual rate to 3.5% from 3.7% in last month’s first estimate.
But more importantly there’s another sign of growing confidence about the country’s recovery.
A Japanese government survey shows that business confidence among people with jobs that are sensitive to economic trends improved in May for the second month in a row.
The Cabinet Office released the results of its nationwide survey of more than 2,000 retail, restaurant and other workers on Wednesday.
An index that shows how workers view economic conditions compared to three months before stood at 36.0, up 7.7 points from the previous month.
The rise is attributed to recovery in store sales, travel and the food service industry amid a weakening of the trend to refrain from spending on leisure activities after the March 11 disaster.
Also cited as a factor is rising demand related to recovery efforts and for energy-efficient products such as LED lights.
As previously reported, the IMF believes in the turnaround story for Japan.
It raised its forecast of economic growth in Japan for 2012 to 2.9% from an earlier 2.1% forecast. The IMF expects Japan’s economic growth to be minus 0.7%.
That means it sees a sharp rise in activity in the third and fourth quarters.
