Chinese industrial output numbers for December confirm that the economy regained momentum in late 2011 as the authorities eased restrictions on credit and money expansion.
Six-month output growth was an estimated 6.1% (not annualised) in December, unchanged from November and up from a low of 3.7% in August. (These numbers are based on an attempt to extract a monthly volume index from published value / price data and 12-month volume growth.)
A further pick-up in real money expansion in December, discussed in a post last week, will underpin the economy in early 2012. A leading indicator derived from the OECD’s Chinese leading index suggests steady trend-like growth – see chart.
The main risk to the “soft landing” scenario is that recent monetary loosening will lead to a revival in inflationary pressures later in 2012, forcing the authorities to reapply the brakes.
