US-China trade war: worst yet to come for Chinese economy, say analysts
- Latest Chinese data shows economy is not collapsing, but raises questions about the outlook for consumer spending
- Data suggests government’s stimulus efforts are starting to bear fruit
Chinese consumers reined in their spending in October on increasing uncertainty amid the trade war with the United States, government data released on Wednesday shows.
But growth in fixed-asset investment and industrial production both accelerated during the first month of the fourth quarter, indicating that while the economy may be slowing, it is not collapsing under the weight of trade war uncertainty.
Analysts, however, said the worst was yet to come for the Chinese economy, as the impact of the trade war is expected to weigh on growth at least until the middle of next year. Many expected the government to enact more stimulus measures in the coming months to offset the affects of the trade conflict.
In October, overall investment growth accelerated to 5.7 per cent in the January to October period, above an expected 5.5 per cent gain and the January to September rise of 5.4 per cent.
The data suggests the government’s programme of infrastructure investment was starting to bear fruit, offsetting declines in manufacturing and property investment growth during October. But analysts said the rebound in investment seen last month may be short-lived.
“The recovery in infrastructure spending will be difficult to sustain without a broader easing of fiscal policy – local government bond issuance has already dropped back in recent weeks in response to budget limits. And home sales, which continued to weaken last month, point to a coming slowdown in property construction,” said Julian Evans-Pritchard, senior China economist at Capital Economics.