Watch for China consumer strength in Saturday economic data

[BEIJING] China's latest economic health check is forecast to underscore the two-speed nature of the nation's growth, with robust consumer spending and ailing industrial production.

Retail sales probably increased to the best level of the year in November, rising 11.1 per cent from a year earlier according to the median economist estimate in a Bloomberg survey. Industrial production remained near a six-year low, increasing 5.7 per cent from a year earlier, while fixed-asset investment for the January through November period slowed to the weakest pace since 2000, projections showed before the National Bureau of Statistics releases the data Saturday at 1:30 p.m. in Beijing.

"It's a phasing out of the old economy and a phasing in of the new economy," said Larry Hu, head of China economics at Macquarie Securities Ltd in Hong Kong. "We'll continue to see very weak growth in sectors like steel, coal and power generation. Consumption will definitely grow faster than industry." Economists are looking for signs stimulus, including six interest-rate cuts since November 2014 and expanded government spending, is starting to arrest the slide in growth. Premier Li Keqiang's target for full-year expansion of about 7 per cent is already at risk after output increased 6.9 per cent in the third quarter. Gross domestic product grew 7 per cent in the first half of 2015 and 7.3 per cent in 2014.

China's broadest measure of new credit rebounded in November, official data showed Friday, signalling that monetary measures are having an impact. Aggregate financing rose to 1.02 trillion yuan (S$222 billion) in November, according to the People's Bank of China. That compared with the median forecast of 970 billion yuan in a Bloomberg survey.

With the full-year expansion heading toward the slowest rate in a quarter century, policy makers are striving to engineer a shift toward greater consumption and services-driven growth without triggering a steeper economic slump. New growth engines from online shopping to Internet banking are for now struggling to pick up the slack as output tumbles from old drivers including heavy industries, residential construction and exports.

"The service part of the Chinese economy is performing quite well," Chris Hall, co-head of Asian equity research at BlackRock Inc in Hong Kong, told reporters Thursday, adding that he expects the shift toward a more consumer-led economy to boost technology, health care and telecommunications companies. "There are some good signs there." One of those good signs was the online shopping frenzy seen on Nov 11, when Alibaba Group Holding Ltd flexed its e-commerce muscle by logging a record 91.2 billion yuan in sales during its Singles' Day promotion. That was up 60 per cent on last year.

By contrast, industrial output in October matched the weakest gain since the global credit crisis with a 5.6 per cent increase. Economists forecast investment in fixed assets excluding rural regions slipped to a fresh low of 10.1 per cent growth in the January through November period.

"Overcapacity will continue to weigh on industrial production," Australia & New Zealand Banking Group Ltd economists led by Liu Li-Gang wrote in a report. "While high-end manufacturing could continue to outperform, the overall trend remains weak."

BLOOMBERG