Consumption in China
China - Consumption
The weakest performance since the financial crisis in the third quarter spells sharper Chinese slowdown
The Chinese economy decelerated further in the third quarter as the effects of aggressive financial deleveraging bogged down growth. GDP expanded 6.5% in annual terms in Q3, down from the 6.7% expansion recorded in Q2. The figure was below market analysts’ expectations of 6.6% growth and the softest print since Q1 2009. In seasonally-adjusted quarter-on-quarter terms, GDP growth inched down to 1.6% from a downwardly-revised 1.7% expansion in Q2 (previously reported: +1.8% quarter-on-quarter).
Although the National Bureau of Statistics (NBS) does not provide a breakdown of GDP by expenditure, additional data suggests that softer investment growth drove the slowdown, weighed on by tighter credit conditions for local government financing and higher borrowing costs. Fixed asset investment spending moderated significantly in the quarter, with infrastructure investment, in particular, slowing notably. On the other hand, manufacturing investment continued to accelerate throughout the quarter, likely due to the shift towards high value-added sectors related to the “Made in China 2025”. Overall, retail sales were subdued and a sharp decline in car sales throughout the quarter suggest household spending weakened in the quarter, despite resilient consumer confidence. Meanwhile, the external sector appears to have remained intact, likely propped up by exports associated with the Belt and Road Initiative and the frontloading of shipments before U.S. tariff increases likely to come into effect at the outset of 2019.
Looking at the breakdown by sector, the secondary sector, which includes manufacturing and construction, posted its worst performance since Q1 2009. Meanwhile, growth in the tertiary sector, which is the largest sector in the Chinese economy, and the primary sector both saw modest upticks in growth.
The third quarter’s performance confirms that the Chinese economy is feeling both domestic and external pressures and the economy will continue to face major headwinds towards the end of the year and moving into 2019. Tighter regulation to rein in elevated debt is weighing on growth and investors’ fears about the outlook are rippling through domestic stock markets and hitting Chinese equities. Trade tensions between the U.S. and China continue to fester and the impact of the rift will likely materialize more concretely in the near-term, especially if the tariff rate on USD 200 billion of Chinese goods rises from 10% to 25% on 1 January 2019. Recently, the government has made efforts to preempt a slowdown—by boosting lending and increasing fiscal stimulus—while the People’s Bank of China lowered the required reserve ratio for banks, in order to boost financing.
China GDP Forecast
FocusEconomics Consensus Forecast panelists expect GDP to expand 6.3% in 2019, which is unchanged from last month’s estimate. In 2020, the panel foresees economic growth of 6.1%.
China - Consumption Data
|Consumption (annual variation in %)||6.8||7.9||7.2||7.8||-|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||3.50||-0.40 %||Nov 09|
|Exchange Rate||6.96||-0.19 %||Nov 09|
|Stock Market||2,599||-0.34 %||Nov 09|
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November 9, 2018
Consumer prices rose 0.2% from the previous month in October, down from September’s 0.7% increase.
November 8, 2018
Export growth accelerated from 14.5% in September to 15.6% in October.
October 31, 2018
The manufacturing purchasing managers’ index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) inched down to an over two-year low of 50.2% in October from 50.8% in September.
October 20, 2018
House prices in 70 large- and medium-sized cities rose 0.9% in September in month-on-month terms according to a weighted average index calculated by Thomson Reuters from data issued by the National Bureau of Statistics (NBS).
October 19, 2018
Industrial production expanded 5.8% annually in September, down from 6.1% in August and missing market expectations of 6.0%. September’s print mainly reflected a slowdown in manufacturing output, while the electricity generation and mining sectors recorded steeper growth than in August. On a month-on-month basis, industrial production increased 0.50% in seasonally-adjusted terms in September, down from August’s 0.53% expansion.