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China’s output slows as Japan shows signs of life

Inside BYD Co.'s Vehicle Assembly Plant and HeadquartersInside BYD Co.'s Vehicle Assembly Plant and Headquarters
Employees assemble brake pads for BYD S6 sport-utility vehicles at the company's assembly plant in the Pingshan district of Shenzhen, China in 2014.Photograph by Brent Lewin — Bloomberg via Getty Images

China’s industrial output fell short of expectations in October, adding to evidence of the country’s economic slowdown.

The National Bureau of Statistics said output rose by 0.5% on the month and by 7.7% on the year, down from a rate of 8.0% in September. Analysts had expected it to sustain that rate.

The figures follow hard on the heels of other data showing industry struggling with a prolonged period of pressure on prices, after years of breakneck investment have left the country with overcapacity in many sectors. Factory gate prices have fallen in year-on-year terms for the last 32 months.

Production of steel and cement both fell, reflecting the pressure on the country’s real estate and construction sectors, which are their biggest customers. Crude steel output was down 0.3% on the year, while cement output was down 1.1%.

China’s consumers are still doing their bit to take over the growth baton from industry. Figures released Thursday showed retail sales up 11.5% on the year in October, in line with expectations and down only fractionally from 11.6% in September. But here, too, the rate of growth has fallen in each of the last five months.

China’s industry is suffering in part from the fact that its international competitiveness is suffering from the authorities’ policy of keeping the renminbi closely pegged to the dollar. The renminbi has actually risen by more than 2% against the dollar since April, while the yen has fallen by 13% against it.

Japanese industry is already falling the benefits: industrial production was up 2.9% on the month in September, after a 2.7% rise in August, while capacity utilization at the country’s fatories rose by 3.6%.

However, Japan’s figures are rebounding from a lower base, after a sharp drop in the spring following a big increase in value-added tax.