Contrary to previous forecasts, China’s economy faced a minor setback this past April as output data disappointed, retail sales fell and prices were eased slightly.
Industrial output advanced at its slowest pace in three years, while fixed asset investment growth fell to its lowest in nearly a decade. The falter reveals that the real estate industry’s credit crunch and the struggles of the export market have in fact had an impact on the region’s growth.
“The data suggests further deceleration of the economy at the start of Q2, with all segments of private demand weak,” said Credit Agricole-CIB economist Dariusz Kowalczyk.
“This increases the pressure for policy stimulus, both fiscal and monetary. In particular given lower inflation, we believe that there is room for, and need for, easing.”
Beijing has been working to improve is monetary and fiscal policies since last year, as a result of the weakening export demand. Analysts now claim that more aggressive strategies must be adopted in order to boost growth.
“The government attempted to revive the economy through a largely passive means, but that strategy appears to be failing. A more assertive monetary policy is now needed,” said HIS of HIS Global Insight. “We believe the government will step up efforts to stimulate the economy, even as genuine concerns remain regarding the very real possibility of over-stimulating.”
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