BEIJING (Reuters) -China’s factory output growth slowed in October and it was still too early to call a turn in the crisis-hit property sector even though consumers perked up, keeping alive calls for Beijing to top-up its recent blitz of stimulus to revitalise the economy.
The burst of data is likely to maintain pressure on Chinese policymakers as they brace for the return to the White House of Donald Trump, who has vowed to hike tariffs on Chinese goods and named China hawks to his cabinet in a troubling sign for the world’s second-biggest economy.
October industrial output grew 5.3% from a year earlier, National Bureau of Statistics (NBS) data showed on Friday, slowing from September’s pace of 5.4% and missing expectations for a 5.6% increase in a Reuters poll.
However, retail sales, a gauge of consumption, rose 4.8% in October, accelerating from the 3.2% pace in September and marking the quickest growth since February.
Retail growth was boosted by a week-long holiday and the annual Singles’ Day shopping festival, which kicked off on Oct. 14, ten days earlier than last year.
Data provider Syntun estimated that sales across major e-commerce platforms rose 26.6% to 1.44 trillion yuan over the Singles Day event.
“China’s economy improved further at the start of Q4, thanks to stronger-than-expected consumer spending,” said Zichun Huang, China economist at Capital Economists.
“We think faster fiscal spending will support a continued cyclical pickup in activity over the coming months. But Trump’s victory casts a shadow over the outlook further ahead,” she added.
NBS spokesperson Fu Linghui told a media briefing the recent policy measures appeared to be having a positive economic effect and that officials would continue to step up support.
“Changes in economic operations in September and October have strengthened China’s confidence in achieving its 2024 target for economic growth” of around 5%, he added.
However, some economists said it was too early to determine whether September’s latest tranche of policy support was sufficient to underpin a solid recovery.
“The stimulus impact should already be reflected in consumption, because the trade-in programme has been in place for a few months,” said Dan Wang, a Shanghai-based independent economist.
This meant “all the other more recent stimulus initiatives haven’t shown any impact, including earlier stimulus focused on housing,” she said.
The NBS said sales of home appliances surged 39.2% in October, driven by the consumer goods trade-in campaign.
Fixed asset investment rose 3.4% in the first ten months of 2024 year-on-year, versus an expected 3.5% rise. It grew 3.4% in the January-September period.
PROPERTY PAINS
“On the property side, conditions remain weak,” said Xing Zhaopeng, ANZ’s senior China strategist, adding there had been “no significant improvements in property investment, sales and prices.”
Property investment fell 10.3% year-on-year in January-October, deepening a 10.1% decline over the first nine months of the year.
Sales narrowed the slump, however, possibly indicating stimulus is starting to inject some life into the beleaguered sector, even if a robust recovery might take some time.
Property sales by floor area in the January-October period fell 15.8% year-on-year, slower than the 17.1% drop over January to September.
On Wednesday, authorities announced tax incentives on home and land transactions, which Zhao said indicated Beijing’s “commitment to further stabilising the property market.”
TRUMP WIN TO BRING MORE STIMULUS?
Trump’s election win last week has also caused unease in China as the President-elect has threatened to impose tariffs of 60% or more on Chinese goods imports, which could potentially usher in a prolonged period of economic uncertainty and further delay a long-awaited revival.
“We expect Chinese policymakers to cut policy rates considerably (by 40bp) and expand the augmented fiscal deficit meaningfully (by 1.88pp of GDP) in 2025,” Goldman Sachs economists said in a note on Friday ahead of the data release, citing the risk the Trump administration poses to the recovery.
They added that “multi-year fiscal expansion would be necessary to counteract various cyclical growth headwinds and address some medium-term structural challenges.”
China’s central bank unveiled its biggest stimulus since the pandemic in September.
And last week, the country’s top legislative body approved a 10 trillion yuan ($1.4 trillion) package to ease local government “hidden debt” burdens, rather than directly injecting money into the economy as some investors had hoped.
Analysts say the barrage of measures will only have a modest positive effect on economic activity in the near term.
“We think the economy will start to slow again by the second half of next year,” Capital Economics’ Huang said.
“By which point Chinese manufacturers will also be facing the additional headwind of a second trade war with Trump.”
