China shows fluctuating performance in May; import/export up, consumer index down

China, the once streaking economy in the world is now performing less than satisfactorily, mainly because of the foreign demand in the shape of exports. It is a no-brainer now that China is an export-driven economy and domestic consumption is just a bystander in the way.

However, the lack of domestic consumption is the one factor that is aggravating the country economic condition. People’s Bank of China last week dropped 25 basis points on the national lending index. This is not good news for a country that has been known for its production and export qualities. It also showed that May was even worse than April.

China is a country of factories and more factories is directly proportional to the economic growth of the country. Same is the case with electricity demand. More production demands more power and the growth in its demand means that the country is in the upward direction to progress.

Though the electricity demand was up in May with an increase of 2.7 percent over the last year, but it was less than what was expected in the fifth month of the year, from a year around. This shows that the country’s economy is growing on a slow pace that is next to a halt.

The most disappointing news however, was the decrease in both consumer and producer price indexes. The former decreased 0.4 percent to 3.0 percent over one month. The latter reported a decrease of 0.7 percent in the same period.

The industrial growth was up but the figures were less than satisfactory. The exports showed an appreciation of 15.3 percent, whereas, the imports were up 12.1 percent. However, the HSBC Purchasing Managers’ Index overshadowed the good news.

The HSBC index showed a drop of 0.9 points to 48.4. The PMI was down to 50.4 in May from 53.3 from April, just keeping up the line for expansion.

The production of passenger cars showed progress against all odds. The delivery of vehicles was up 22.6 percent but there is a story behind the increase in deliveries. Carmakers are forcing dealers to purchase their commodities. The inventories at all the dealers have increased from 45 days to two months for foreign brands and 60 to 70 days for the domestic brands.

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Posted by Usman Khalid on Jun 11 2012. Filed under Business, South Asia, World. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.