Fixed investment in China loses steam

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/24

Fixed investment growth accelerated a bit in early spring as the public sector ramped up infrastructure construction. Now it appears fixed investment growth has again slowed. Nominal growth in fixed asset investment (FAI) fell below 10 % y o y in January-May as growth in both public and private investment faded. Growth in private investment, which accounted for slightly more than 60 % of all FAI in the first five months of the year, slowed in May to around 1 %. Heavy industry investment fell rapidly in the northern parts of the country.

Production trends in May were in line with previous months. Industrial output growth has long remained around 6 % and the growth of retail sales this year has remained below 10 % in real terms, which reflects slowdown in average disposable income to 6.5 % y-o-y in 1Q16.

May price trends held few surprises. Consumer price inflation slowed to 2 %, and there was a slight rise in the core inflation rate (food and energy excluded). Although May producer prices were still lower than a year earlier, prices on a monthly level have risen for three months in a row.

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