China November Output, Investment Data Show Further Weakness, More Stimulus Expected

(Reuters) - China's economy showed further signs of fatigue in November, with factory growth slowing more than expected and investment expansion hovering near a 13-year low, putting pressure on policymakers to unveil stronger stimulus measures.

A deluge of weak data this week has reinforced the view that annual economic growth may weaken from 7.3 percent in the third quarter - already the lowest since the great financial crisis and further straining the fragile global economy.

A surprise interest rate cut by China's central bank last month signaled policymakers' growing concern that the world's second-largest economy may be at risk of a sharper slowdown that could fuel job losses and debt defaults.

"The data bodes ill for GDP growth in the fourth quarter, which is bound to slow further," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.

"It will put pressure on policymakers to ease monetary stance again and we expect an RRR cut still in December," he said, referring to a reduction in banks' required reserve ratios (RRR) which would, in theory, encourage more lending.

Factory output rose 7.2 percent in November from a year earlier, slowing from October's 7.7 percent, the National Bureau of Statistics said on Friday.

The reading missed analysts' forecasts of 7.5 percent and marked the second lowest expansion since the depths of the global crisis in December 2008.

The closure of many factories in northern China early in November to reduce air pollution as Asia-Pacific leaders met in Beijing was no doubt partly to blame for the weaker-than-expected output. But recent surveys have also shown slackening growth in export orders while a cooling housing market is weighing on domestic demand for products from concrete to steel.

Fixed-asset investment, an important driver of growth, expanded at its slowest rate in nearly 13 years. It grew 15.8 percent in the first 11 months from the same year-ago period, in line with market expectations but slowing from a 15.9 percent rise in the first 10 months.

NO QUICK TURNAROUND IN PROPERTY SECTOR

Growth in real estate investment slowed to 11.9 percent in the first 11 months of 2014 - the slowest in more than five years - from 12.4 percent in January-October.

New floor space under construction shrank 9 percent as developers tried to work off massive inventories, which have helped push down China house prices for six straight months.

While there are tentative signs that falling prices and expectations of further policy easing are attracting more home buyers, analysts don't expect a quick turnaround in property investment, which has been a key drag on economic growth.

Property sales hit 132.2 million square meters in November, the highest level in the past 11 months, though they were still down 11.1 percent from the same period a year earlier.

Highlighting overall economic sluggishness, power generation rose a scant 0.6 percent from a year earlier, the third straight month of deceleration.

Consumption was the only bright spot, with retail sales growth quickening slightly to 11.7 percent from 11.5 percent in October, which was the slowest pace since early 2006.

The authorities will try to sustain reasonable growth in 2015 even though the economy faces relatively big downward pressure, top leaders said after the annual Central Economic Work Conference on Thursday.

Data earlier this week China's trade performance faltered in November while consumer inflation hit a five-year low, stoking expectations that Beijing may move more aggressively to head off the risk of deflation.

Analysts expect the central bank to cut interest rates again and lower banks' reserve requirement ratios. The government also could accept a wider 2015 budget deficit to spur spending.

"We're ready for an RRR cut at any point. We think there will be 100 basis points of cuts over the next couple of quarters," said Tim Condon, head of research Asia at ING in Singapore, though he sees no more interest rate cuts.

Full-year growth is on track to miss the government's 7.5 percent target and mark the weakest expansion in 24 years.

Economists who advise the government have recommended that China lower its economic growth target to around 7 percent in 2015.