China Mixed Data Calls For More Stimulus
China’s industrial production and retail sales strengthened notably in November but the low base of comparison made data less reliable to conclude that the recovery is as strong as the figures indicate and adds pressure for more support measures.
Industrial production posted an annual growth of 6.6 percent in November following a 4.6 percent rise in October, the National Bureau of Statistics reported Friday. The rate also exceeded economists’ forecast of 5.6 percent.
Growth in retail sales accelerated to 10.1 percent from 7.6 percent in the previous month. But this was weaker than the 12.5 percent expansion economists had forecast.
During January to November, fixed asset investment registered a steady growth of 2.9 percent, slightly below forecast of 3.0 percent.
In November, the urban unemployment rate held steady at 5.0 percent.
The Chinese economy was still making headway last month partly due to the step-up in policy support which looks set to remain flowing going into 2024, Capital Economics’ economist Sheana Yue said.
Given positive signals from policymakers, a modest rebound over the coming quarters is likely, the economist added.
The economy was implementing lockdowns in November 2022 and many of these data releases benefit from the very weak comparisons in 2022, ING economist Robert Carnell noted.
“Our cautious conclusion from all of this is that China’s recovery is ongoing,” Carnell added.
Further, Carnell said the recent policy changes to support the real estate market in key cities look like more of the same supply-side measures that have not yet, and probably never will lead to the sort of short-term fix but they should provide a more solid framework for recovery when demand returns.
The People’s Bank of China on Friday added CNY 1.45 trillion into the financial system via 1-year medium-term lending facility. The interest rate on MLF was retained at 2.50 percent.
The PBoC also conducted CNY 50 billion of seven-day reverse repos at an interest rate of 1.8 percent.
Previously, official data suggested that China remained in a period of negative inflation in November.
Due to the deepening of food price deflation, consumer prices declined 0.5 percent, the most in three years.
Earlier this month, Moody’s downgraded China’s sovereign rating outlook to ‘negative’ from ‘stable’ and retained its credit ratings.
The agency assessed that fiscal support measures amid property market downturn poses downside risks to fiscal health.
S&P Global warned that the slump in China could spread to other regions given the country’s large proportion of global trade.
The rating agency projected China’s GDP growth to slow to 4.6 percent in 2024 from an estimated 5.4 percent this year.
The government aims to achieve a more moderate growth of around 5 percent this year.
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