Chinese factories increased production in August and money growth easily topped analysts’ expectations, according to data on Saturday, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation. Inflation in China sped to its fastest pace in 22 months, though the bulk of price rises stemmed from higher food costs, which analysts have said should be transitory after a spell of bad weather this summer.
image: buyusa.gov
Indian shares have risen to their highest level in more than two and a half years after data showed industrial output rose faster than expected. Figures released after Friday’s market close showed July’s factory output was up 13.8% compared with a year ago. India’s benchmark Sensex index rose 322 points, or 1.7%, to 19,122, its highest since January 2008. Banks led the gains as investors expect demand for loans to rise on the back of an expanding economy. Shares in State Bank of India, the country’s largest lender, were up 4.3%. ICICI Bank shares rose 3.5%, while HDFC Bank was 1.1% higher.
With a good monsoon this year inflation in food prices in India should now reduce sharply and if industry and manufacturing maintain their spurt, a total 10%+ GDP growth for 2010 -11 becomes probable.
Most Asian stocks too gained momentum on Monday. At 11.20 am today, the Sensex was trading up 293.53 points or 1.56% at 19,093.19, while Nifty was trading higher by 85.90 points or 1.52% at 5,725.95.
Europe and the US will continue to experience a prolonged period of low or choppy economic growth but this will have little impact on the growing domestic consumption of China and India. Companies selling into these nations are experiencing buoyant trading conditions.
This should be sufficient to mitigate the risks of a prolonged double-dip recession in Europe and the US but will not be enough to avoid it.
The k2p blog 