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China Economic Activity November 2023

China: Real-sector data for November is mixed

Industrial output increased 6.6% compared to the same month of the previous year in November, which was above October’s 4.6% increase and overshot market expectations. November’s print marked the best reading since February 2022. Looking at the details of the release, November’s pickup was broad-based, with the manufacturing, mining and quarrying and energy sub-sectors all accelerating.

Also in November, retail sales rose 10.1% year on year, up from October’s 7.6% growth but well below market expectations of a 12.5% expansion. A favorable base effect—retail sales declined steeply in November 2022 due to Covid-19 lockdowns—flattered the November 2023 growth reading.

In January–November, fixed investment rose 2.9%, matching January–October’s expansion. While investment by state-owned enterprises remained strong, private investment continued to contract, a sign of subdued business confidence.

Finally, property indicators were downbeat, with November seeing sharp year-on-year falls in property sales and floor space under construction.

Giving their take on the November data, Goldman Sachs analysts said:

“China’s November activity data and our high-frequency trackers for early December suggest sequential growth momentum remains largely stable, although the strength appeared unevenly distributed across sectors and the impact of recent policy easing has not fully kicked in. We believe favorable base effects related to China’s Covid exit wave late last year should help boost year-on-year GDP growth in Q4 vs. Q3.”

DBS analysts commented:

“The crux of the slow growth is soaring real interest rates. The real policy rate has risen to 3.95% in Nov from the trough of 0.85% in Sep 22. Tight money supply added upward pressure to funding costs.”

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