A modest beat across the board supports the Australian and New Zealand dollars and broader Asian risk sentiment, though the relief is tempered by weak investment. For oil, firmer industrial output and retail sales from the world’s largest crude importer offer some support to the demand side, at a time when Iran war disruptions are already keeping supply risk elevated. Industrial metals and iron ore face a mixed message: stronger factory activity helps, but a 20.6% drop in property investment is a clear drag on construction demand. Reduced odds of aggressive stimulus may cap enthusiasm for Chinese equities, which are already leaning on state support, and lower expectations for a cut at Tuesday’s LPR decision.
China’s economy has climbed back into Beijing’s target range on the strength of its factories and exporters, giving policymakers room to keep holding back the big stimulus that weak consumers and a broken property market still need.
Summary:
- GDP (Q3, Y/Y): 4.5%, expected 4.4%, prior 4.3%
- GDP (Q3, Q/Q): 1.2%, expected 1.1%, prior 0.9%
- Retail sales (Sep, Y/Y): 1.1%, expected 0.5%, prior 0.4%
- Industrial production (Sep, Y/Y): 5.5%, expected 5.4%, prior 5.2%
- Fixed asset investment (YTD, Y/Y): -7.2%, expected -7.3%, prior -7.2%
- Growth for the first nine months was 4.6%; property investment fell 20.6% and infrastructure investment fell 4.2%
- The beat eases pressure for large-scale stimulus; the LPR decision is due Tuesday
China’s economy grew faster than expected in the third quarter, with GDP rising 4.5% from a year earlier, landing at the bottom of Beijing’s annual target range and easing pressure on policymakers to roll out more aggressive stimulus.
The figure, released by the National Bureau of Statistics on Monday, beat the 4.4% forecast in a Reuters poll and picked up from 4.3% in the second quarter, which had been the weakest pace in more than three years. On a quarterly basis, the economy expanded 1.2%, ahead of expectations for 1.1% and up from 0.9%. Growth for the first nine months of the year was 4.6%, within the government’s 4.5% to 5.0% target.
The September activity data also came in slightly firmer than expected. Industrial output grew 5.5% from a year earlier, its fastest pace in six months and up from 5.2% in August, supported by strong exports of AI-related technology goods. Retail sales rose 1.1%, more than double August’s 0.4% and the quickest growth since March, beating forecasts.
Investment remained the weak spot. Fixed asset investment fell 7.2% in the first nine months, unchanged from the January to August period and marginally better than the expected 7.3% decline. Property investment slumped 20.6% over the same period, and infrastructure investment shrank 4.2% despite a series of measures aimed at reviving it.
Beijing has recently expanded support for home buyers, steered cheaper credit toward infrastructure and technology, allocated 550 billion yuan of unused government debt quotas to ease local government finances, broadened loan interest subsidies for small private firms and consumers, and tapped an 800 billion yuan policy financing tool for infrastructure. Earlier on Monday, data showed new home prices falling at a slightly slower pace in September, though still declining.
The results reinforce the picture of a two-speed economy, in which factory output and exports driven by the global technology boom offset weak consumption, private investment and property. That reliance on exports carries its own risks. China’s trade surplus widened more than expected in September and is on track to exceed last year’s record of $1.2 trillion, adding to frictions with partners including the European Union, which has agreed a deal with Beijing to limit Chinese hybrid vehicle shipments.
With growth back within the target range, the case for large-scale stimulus has weakened, and policymakers appear content to rely on targeted support. Tuesday’s loan prime rate decision will be the next signal of Beijing’s policy stance.
This article was written by Eamonn Sheridan at investinglive.com.
