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Economy in Brief

Growth In China's Industrial Production And Retail Sales Allays Fears Of Weakening Global Economy
by Louise Curley   September 13, 2010

The latest economic news from China suggests that the deceleration of growth in industrial production and in retail sales evident in the first half of this year may be coming to an end. The year to year gain in industrial production, which had declined steadily from 21.3% in January to 13.6% in July, rose to 14.2% in August. Year to year growth in retail sales, which peaked at 22.1% in February of this year and declined irregularly to 17.9% in July, rose to 18.4% in August. Year to year percent changes in industrial production and in retail sales are shown in the first chart.

The news has helped to allay fears of a global slowdown or even a double dip in the global economy. Over the past ten years, the correlation, R, between the quarterly year to year percentage changes in China's industrial production and its real gross domestic product was .81 and the R2 was .66, indicating that changes in industrial production account for 66% of the changes in GDP. The correlation between the quarterly year to year changes in industrial production and GDP is shown in the second chart while the third chart shows GDP on a quarterly basis and the Index of Industrial Production on a monthly basis. The August industrial production data look encouraging.

 China Aug 10 July 10 Jun 10  May 10 April 10 Mar 10 Feb 10 Jan 10
Year to Year % Change
Industrial Production 14.2 13.6 14.0 11.6 18.1 18.3 20.9 21.3
Retail Sales 18.4 17.9 18.3 18.7 18.5 18.0 22.1 14.0
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