China economy continues strong growth trajectory in October, but imbalances remain
- China’s industrial production grew by 6.9 per cent in October year on year, retail sales grew by 4.3 per cent and fixed asset investment grew by 1.8 per cent year to date
- Retail sales continued to lag industrial output, with consumers remaining cautious in their spending in the world’s most populous nation
China’s economy expanded strongly in October, as the recovery in consumption continued to gather pace, data from the National Bureau of Statistics (NBS) released on Monday showed.
But imbalances remained, with the industrial and investment-led parts of the economy outperforming analysts’ expectations, while consumption lagged behind.
Retail sales, a key indicator of consumption trends in the world’s most populous nation, grew by 4.3 per cent from a year earlier, marking the third successive month of expansion. This was up from 3.3 per cent growth in September, but missed expectations. Analysts had forecast 5.0 per cent growth.
Fixed asset investment grew by 1.8 per cent over the first 10 months of the year, with the pace picking up from 0.8 per cent in the first nine months. This was ahead of analysts’ expectations of 1.6 per cent growth. This was powered by a huge uptick in investment in the primary industries – such as mining, farming, quarrying – and hi-tech sectors.
China had struggled to kick-start the retail economy after the coronavirus lockdown at the start of 2020, with export-led industries, particularly manufacturing, recovering much more quickly.
The industrial economy continues to expand at a faster pace, but the quickening pace of retail sales’ growth suggests consumption is gaining momentum. The catering sector reported positive year-on-year monthly growth for the first time this year in October, the NBS said, expanding slightly by 0.8 per cent.
Analysts pointed to the wearing off of the front-loading effect on semiconductors the previous month, ahead of potential new US technology-based sanctions, as well as the seasonal effects from China’s “golden week” holiday.
“Based on various factors, the current monthly economic data may have already peaked [for the year],” wrote Liang Zhonghua, chief macroeconomic analyst at the Research Institute of Zhongtai Securities in a note.
The world’s biggest free trade deal is viewed as relatively modest in terms of the trade liberalisation measures it contains, but nonetheless encompasses close to one-third of the world’s population and global economy. But it is unlikely to be ratified until the middle of next year at the earliest.
“The economic growth rate in the fourth quarter is likely to be faster than the third quarter,” said Fu, the NBS spokesman.
Analysts at Nomura said that Monday’s data showed that China’s economic recovery was “on track”.
“We maintain our real growth forecast of 5.7 per cent year on year for the fourth quarter, up from 4.9 per cent in [quarter three], resulting in annual growth of 2.1 per cent this year,” they wrote.