China’s mixed economic data in October pointed to an uneven and precarious recovery as the world’s second-largest economy still needs stronger supportive measures amid ongoing headwinds.
Consumption and industrial activity beat market expectations last month, but investment again disappointed and the real estate sector remained a weak link.
Thanks to a spending spree during the extended Golden Week holiday, retail sales rose 7.6 percent year-on-year in October, beating market expectations and rising from 5.5 percent growth in September, the National Bureau of Statistics said ( NBS) with On Wednesday.
However, real estate investment fell 9.3 percent year-on-year in the first ten months, falling even further from the 9.1 percent decline in the first three quarters, increasing the risk the real estate sector poses to the outlook represents China.
Politicians are likely to continue to provide support and may even step up measures to prevent the economy from falling back
Capital economics
“Data suggests the recovery struggled to gain traction early in the fourth quarter, but it was nowhere near as weak as some had feared,” analysts at Capital Economics said.
“Nevertheless, we continue to expect a slight re-acceleration in growth in the coming months. Policies are expected to continue to be supportive and may even be strengthened to prevent the economy from falling back.”
Due to the real estate downturn, fixed investment increased 2.9 percent year-on-year in the first ten months, down from 3.1 percent in the first nine months.
Meanwhile, private investment remained weak in the first ten months as confidence remained weak.
“There are still many external instabilities and uncertainties and domestic demand remains inadequate,” the NBS said on Wednesday.
“The foundation of the economic recovery still needs to be strengthened.”
Additional public investments in water infrastructure, affordable housing and urban renewal are likely to become sources of growth, said Xu Tianchen, an economist at The Economist Intelligence Unit.
In October, China’s industrial production remained stable as year-on-year growth rose to 4.6 percent from 4.5 percent in September, with production of automobiles, solar batteries and integrated circuits posting notable gains.
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Zhou Hao, chief economist at Guotai Junan International in Hong Kong, said the central bank had already increased liquidity support and expected further credit support for the struggling property market.
Ahead of the data release on Wednesday, the central bank pumped 500 billion yuan ($68.7 billion) of net liquidity into the market through the medium-term credit facility.
The move suggested that monetary policy will remain supportive to support the economic recovery, he added.
Elsewhere, the overall urban unemployment rate was 5 percent in October, unchanged from September.
“Given the ongoing headwinds to growth from the housing downturn, still-fragile confidence and ongoing financial risks, we expect the central government to significantly increase easing in the coming months,” Goldman Sachs said on Wednesday.
China’s economic recovery has become a global concern, its performance contrasting sharply with positive growth in neighboring countries after its 4.9 percent year-on-year growth in the third quarter was largely due to the low comparable base.
India’s economy grew 4.4 percent year-on-year in the third quarter, experiencing a surge in activity due to the Diwali festival.
Vietnam’s gross domestic product growth also accelerated in the third quarter, with the 5.33 percent year-on-year increase largely driven by robust manufacturing activity and exports.
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In the third quarter, China’s economy surprised the market, growing 1.3 percent over the previous three months, higher than the 0.8 percent sequential increase in the second quarter. China’s economy grew by a cumulative 5.2 percent in the first nine months of the year.
And the growth in the third quarter also meant that China is expected to only need annual growth of 4.4 percent in the fourth quarter to meet its full-year growth target of “around 5 percent.”
Ding Shuang, chief Greater China economist at Standard Chartered Bank, said China’s economy could grow 5.7 percent in the fourth quarter, bringing full-year growth to 5.4 percent.
He added that real estate and infrastructure investments were not the focus of long-term stimulus, with high-tech consumption and the services sector being potential areas of focus.
Additional reporting by Mia Nulimaimaiti and Ji Siqi