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China's April Industrial Output Slows to 15.7%

China's factories moved down a gear last month, the government said on Wednesday, as export growth softened and the new housing market slowed.

Industrial production growth dropped to 15.7 percent in the year to April, below market forecasts of a 17.7 percent increase and well off March's pace of 17.8 percent.

China, Chinese Flag
CNBC.com
China, Chinese Flag

The National Bureau of Statistics attributed the slowdown to non-specified one-off factors. Excluding those, the growth rate was about the same as in March and in April 2007, when output expanded 17.4 percent, the bureau said.

Still, economists said the report was another sliver of evidence that the ripples of the U.S. subprime crisis, which has driven the American economy to the brink of recession, are reaching China's shores.

"It's been an unusually volatile start to the year, but the softness is explained by exports and residential construction," said Ben Simpfendorfer, a strategist with Royal Bank of Scotland in Hong Kong.

Chen Jijun, an economist with CITIC Securities in Beijing, also cited weakening external demand for the lower rate of factory output, which he said was likely to be dented further by the devastating earthquake that struck Sichuan this week.

"Industrial output in May will be weak as well, partly because of disruptions from the earthquake," Chen said.

However, economists say the overall impact of the quake on the economy will be limited.

Sichuan, a poor, largely rural province, accounts for only about 4 percent of Chinese gross domestic product and 2 percent of its exports.

A breakdown of the data suggested there were also domestic reasons for the lower tempo of factory output.

Growth in cement production, for instance, slowed to 10.8 percent in the 12 months to April from 26.3 percent in March, a trend that Zhang Shiyuan, an analyst at Southwest Securities in Beijing, said could persist.

"The sluggish property market ... will also reduce demand for construction materials, such as cement and steel," he said.