China: Real-sector data is mixed in October
Latest reading: Industrial output expanded 5.3% in year-on-year terms in October, down from 5.4% in September and undershooting market expectations. The result came on the back of softer utilities output growth outweighing faster manufacturing and mining output growth.
Meanwhile, retail sales growth rose to 4.8% in October from 3.2% in September, exceeding market expectations. A government trade-in scheme for consumer goods supported sales.
Thirdly, in January–October, fixed-asset investment increased 3.4%, which was below market expectations, with declining private investment partly offsetting robust investment by state firms.
Finally, some housing indicators—such as new home sales and property prices—improved in October, suggesting an incipient upturn following a slew of recent government stimulus measures. However, other housing indicators remained in double-digit contraction.
Panelist insight: On the significance of the October data, Goldman Sachs analysts said:
“October activity data pointed to a gradual improvement in growth momentum, especially on consumption, supporting our view that sequential GDP growth may accelerate from Q3 to Q4. That said, given potential US tariffs hit under Trump’s second term, we recently lowered our 2025 GDP growth forecast to 4.5% from 4.7% previously.”
Highlighting risks to the outlook, Nomura analysts said:
“This rebound in GDP growth in general and in retail sales in particular could be brief for several reasons. First, despite the policy pivot since September, Beijing has yet to announce real fiscal stimulus measures other than the debt swap program. Second, a growth recovery “blip” in Q4 might send Beijing an illusory signal of economic strength and delay the necessary efforts in rolling out fiscal stimulus, market clearing measures and reforms of the ill-functioning fiscal system. Third, there are rising headwinds, including a 60% tariff threatened by the incoming Trump administration, which will be filled with self-proclaimed China hawks.”