China's industrial output up 8.9 pct in May: govt


July 15, 2010 Updated Jun 14, 2009 at 9:41 PM CDT

China's industrial output rose 8.9 percent in May from a year earlier, the government has said, as massive stimulus measures introduced last year kick in.

The figures come as the Asian giant's export dependent economy is battered by the global slump, which has slashed demand in key overseas markets, leading Beijing to seek ways of boosting domestic spending.

May's data represents an improvement on a 7.3 percent increase in April and the 8.3 percent growth recorded in March, according to a statistics bureau statement.

"The rapid improvement of domestic demand is reflected in industrial output. That is the main reason for the growth," said Hao Daming, a Beijing-based economist with Galaxy Securities.

"We expect the (industrial output) figure will further accelerate in the rest of the year but the increase will be limited, mainly because of very weak exports."

Growth in industrial output -- a main gauge of activity in factories and plants across China -- hit lows of just over five percent at the end of last year as the world slowdown bit.

The government late last year launched an unprecedented four-trillion-yuan (585 billion dollar) spending package focused on infrastructure investment -- and various economic indicators show it is starting to have an impact.

However, despite the welcome news from Beijing, the figures were still down from the 16 percent increase logged in May last year, according to the bureau statement.

May's production of cement, a key component in construction projects, increased 13.5 percent from a year earlier, the statistics bureau said.

In another sign of increasing domestic consumption, the statistics bureau said Chinese retail sales, the main gauge of consumer spending, grew by 15.2 percent year on year in May, up from the 14.8 percent rise in April.

For all of last year, retail sales were up 21.6 percent.

The World Bank has forecast economic growth of 6.5 percent in 2009, which would be China's lowest growth rate since 1990. It would also come after the country experienced double-digit growth between 2002 and 2007.

The data was released a day after figures showed exports dived 26.4 percent year on year in May, a seventh straight month of declines.

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