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Economists鈥?forecasts and early data releases suggest China鈥檚 economy kept its momentum in August, after a series of positive surprises in July.
The factory sector stayed strong, with early signs from the purchasing managers鈥?index pointing to an uptick in manufacturing activity. Industrial output likely rose 9.9% on-year in August according to the median forecast of 11 economists surveyed by The Wall Street Journal, up from 9.7% in July. The data comes out at 0530 GMT on Tuesday.
Underpinning that resilience: strong investment powered by massive credit in the opening months of the year. Government spending on infrastructure, an increase in new building in the real estate sector, and a return to calm in the banking system after a liquidity squeeze earlier in the summer all played a part in stabilizing growth.
With evidence of a pick-up mounting, investment bank economists have been rushing to revise their downbeat gross domestic product forecasts for the third quarter. now expects 7.6% year-on-year GDP growth up from 7.4%, and Deutsche Bank projects 7.7% versus a previous forecast of 7.5%. Growth in the second quarter was 7.5%.
The property sector continues to rise, with house prices up 8.6% on year in August in the 100 cities tracked by data provider China Real Estate Index System, accelerating from 7.9% in July. Local governments in smaller cities like Wenzhou have not been enforcing policies meant to cool the market, CREIS said, even as local governments in Beijing and Shanghai suggest they want to toughen the curbs.
鈥淲e expect property investment to continue recovering modestly on solid sales growth in the first half of this year,鈥?said UBS economist Tao Wang. The construction subindex of the official services purchasing managers index climbed to 59.5 in August from 58.5 in July, outperforming virtually every other area of the economy.
China鈥檚 production lines are also getting a lift from a gradual recovery in the U.S. and Europe. South Korea鈥檚 exports, which serve a similar market, were up 7.7% on-year in August and the export orders subindex of the official PMI climbed back into positive territory. China鈥檚 likely rose 6%, up from 5.1% in July, according to the median forecast of 11 economists polled by The Wall Street Journal.
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