China retail sales growth softens as industrial production steady

Posted on November 14, 2016

China’s retail sales softened as industrial production and investment held more or less steady in spite of a weaker showing from exports last month.

Industrial production rose 6.1 per cent year on year in October, according to China’s National Bureau of Statistics, unchanged from September’s level and just below a median forecast from economists of 6.2 per cent.

That was in line with last month’s manufacturing PMIs, which showed an uptick in sector activity, and despite exports having fallen 7.3 per cent during the same period, suggesting relatively steady domestic demand.

But retail sales growth softened to 10 per cent in October, betraying economists’ expectations it would hold steady at 10.7 per cent growth from September. That deceleration could prove a spoiler to broader growth if it continues apace, as observers have attributed sustained activity growth among manufacturers largely to demand from within China’s borders.

Economists had likewise expected year-to-date urban fixed asset investment, a rough proxy for long-term spending, to remain at September’s level of 8.2 per cent year on year growth. Instead it ticked upward slightly to 8.3 per cent.

That was fuelled by a quickening in private investment in September and October, after private investment sank to record lows in the first eight months of the year.

Private fixed asset investment for the year ended October was up 2.9 per cent, accelerating another 0.4 percentage points from a month earlier, while state investment dropped 1.1 percentage points to 20.5 per cent. That pushed the state share of total investment for the year to date to 35.5 per cent, still the largest share since 2011 and reflecting the outsize role of government spending in sustaining economic growth during 2016.

A surge in coal prices since August has helped mitigate China’s persistent producer price deflation, but it is unclear to what extent it reflects a recovery of growth in the broader economy or simply futures speculation after supply cuts created a temporary tightness in demand.

You must be logged in to post a comment Login