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Andrew Mullen

1. Retail sales hit eight-month high
China’s retail sales increased by 4.8 per cent year on year last month, compared with the 3.2 per cent growth in September, marking the highest level since February.
The reading beat expectations of 3.9 per cent growth projected by economists polled by Chinese financial data provider Wind.
“China’s economy improved further at the start of the fourth quarter, thanks to stronger-than-expected consumer spending,” said Zichun Huang, China economist at Capital Economics.
Betty Wang, lead economist at Oxford Economics, said the main drivers were the consumer trade-in programme and policy support for electric vehicle purchases.


Sales of household appliances soared by 45.1 per cent year on year in October after growing by 25 per cent in September, outperforming other consumer goods.
Car sales also extended gains and rose by 7.7 per cent year on year, reversing the downward trend seen in previous quarters.
2. Property drag goes on, but rebound emerges
Property investment has been a major drag on the economy and it fell by 10.3 per cent year on year in the first 10 months of the year, compared with the 10.1 per cent fall observed in the first three quarters of this year.
But Wang at Oxford Economics said the property market has also shown some initial response to intensified property easing measures.
The contraction in floor space sold narrowed to 1.3 per cent year on year in October from the double-digit decline seen over the past 17 months, she said.
Prices of newly-built and second-hand homes in tier-1 cities also turned positive month on month, with some second-tier cities also showing an uptick.


3. Fixed-asset investment plays smaller role
China’s overall investment into fixed assets, including major items such as infrastructure construction, manufacturing and property spending, rose by 3.4 per cent in the first 10 months of the year, unchanged from January to September.
“Investment played less of a role in driving the economic recovery than we had expected. Year-to-date fixed investment growth remained unchanged at 3.4 per cent year on year last month, implying that the monthly year-on-year growth rate held steady at 3.4 per cent,” added Huang at Capital Economics.
Wang at Oxford Economics said the gauge remaining unchanged suggested that there had been “little impact on investment from the recent government push”.
4. Industrial output edges down
China’s industrial output rose by 5.3 per cent year on year last month, compared with a 5.4 per cent increase in September.
“Industrial output growth edged down last month … after surging to a four-month high in September,” added Huang at Capital Economics.
“But this was entirely due to a pullback in the utilities sector, possibly weather-related. Growth in mining and manufacturing output both continued to accelerate last month, consistent with wider evidence of stronger goods demand.”
5. Urban unemployment eases
China’s overall urban unemployment rate for October stood at 5 per cent, down from 5.1 per cent in September.


6. ‘Boost likely to be short-lived’ without further easing
Wang at Oxford Economics said that despite the data in October suggesting that previous policy measures had started to bear fruit, “there’s little room for complacency”.
“Deflationary pressures, sluggish investment growth, as well as challenges in the property and external sectors will continue to pose risks to economic stability,” she said.
“These will necessitate more decisive policy support in the near term.”
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, agreed the policy shift in late September had contributed to the stabilisation of China’s economy in October.
“The stock market rally likely contributed to better consumer sentiment in October. The property sector has not turned around, and prices continued to fall, although at a slower pace,” he said.
“The economy will likely stay stable in the fourth quarter. The market has shifted the focus to next year.
“With the trade war looming, the key question is how much fiscal stimulus China will run to counter potential export slowdown. Another important question is what role the exchange rate will play next year.”
Unless this is followed by substantial fiscal easing next year, which seems unlikely, the boost is likely to be short-lived
Zichun Huang, Capital Economics
Huang at Capital Economics agreed that faster fiscal spending would support a continued pickup in activity over the coming months, but that Donald Trump’s victory in the US presidential election would cast a shadow over the outlook.
“We expect economic growth to continue regaining momentum in the coming months. Property support measures do seem to be providing some relief to the housing market – new home sales picked up by the most since May last month,” he said.
“And while policymakers have yet to commit to concrete plans for new borrowing, local governments are starting to make greater use of existing fiscal space.
“But unless this is followed by substantial fiscal easing next year, which seems unlikely, the boost is likely to be short-lived.
“We think the economy will start to slow again by the second half of next year, by which point Chinese manufacturers will also be facing the additional headwind of a second trade war with Trump.”


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China’s retail sales continued to improve in October following a raft of stimulus policies, but property investment remained a drag


China’s retail sales continued to improve in October following a raft of stimulus policies, but property investment remained a drag.


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Explainer | ‘Little room for complacency’: 6 takeaways from China’s October economic data

China’s retail sales continued to improve in October following a raft of stimulus policies, but property investment remained a drag

1. Retail sales hit eight-month high