Beijing/Tokyo: China’s May factory output rose more than forecast and retail sales growth accelerated, giving new impetus to investor hopes the world’s biggest emerging economy can lead a global revival.
In Japan, industrial output data for April was revised upwards to post the biggest monthly gain in more than half a century, suggesting the world’s No.2 economy may be picking up from its worst slump since World War II.
The data followed figures from the United States on Thursday that showed a rise in retail sales in May for the first time in three months and a fall last week in workers claiming jobless benefits to the lowest level since January.
A growing conviction that the global economy is starting to claw its way out of the deepest recession in six decades has seen stock markets rallying strongly from lows plumbed in March, while hopes of a rebound in demand have driven prices of oil and industrial metals to multi-month highs.
Asian shares rose, with Tokyo’s Nikkei up 1.6% to close above 10,000 for the first time in 8 months and MSCI’s index of shares elsewhere in Asia gaining 0.2%, although market players said momentum was slowing.
“Buyers have returned and sentiment is good,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Japan.
“But the ‘green shoots´ rally has really about reached its limits, and we’ll need some signs of improving company earnings such as upward forecast revisions, perhaps in a month or so, to really make more gains. For a while, expect consolidation.”
China’s National Bureau of Statistics said annual industrial output growth rebounded to 8.9% in May from 7.3% in April, outpacing a median forecast of 7.5%.
Annual growth in retail sales rose to 15.2% in May from 14.8% in April, slightly ahead of forecasts, partly due to a moderate pace of deflation.
Together, the reports suggested a yuan 4 trillion ($585 billion) government stimulus package and incentives to encourage purchases of everything from cars to home appliances are helping offset weak global demand for the exports that powered China’s breakneck growth in recent years.
“We expect the economy to accelerate in the remainder of the year because currently we see policy-driven investment growth but at the same time we expect that exports should have bottomed and will gradually improve,” said Qing Wang, an economist with Morgan Stanley in Hong Kong.
Japan’s industrial output rose 5.9% in April, revised up from a preliminary reading of 5.2% and marking the biggest monthly gain since 1953.
Separate surveys also showed consumer confidence picked up in May, while a capacity utilisation index rose 10.2% in April, posting its biggest monthly gain on record and its second successive increase since hitting a record low in February.
Japan’s export-driven economy has been hit especially hard by the downturn, forcing top firms such as Toyota Motor and Sony Corp to slash production and lay off workers.
And capital spending is unlikely to increase any time soon as factories are still running at levels far below full capacity.
“With still about 30% of excess capacity, companies won’t think about boosting capital spending just yet,” said Naoki Iizuka, senior economist at Mizuho Securities.
“If industrial output continues to improve during the summer, capacity utilisation may exceed 80%. That’s when companies may feel more like increasing spending.”
In India, data showed industrial output rose 1.4% in April from a year earlier, rebounding after declining three times in fourth months.