China’s economic resurgence showed some signs of fading last month, at least compared to recent standards, with both industrial output and retail sales undershooting expectations.
According to China’s National Bureau of Statistics (NBS), industrial output grew by 6.1% in October from the levels of a year earlier.
The result was unchanged from the level seen in September but missed expectations for an acceleration to 6.2%.
The NBS said crude steel output grew by 4.0% year-on-year to 68.51 million tonnes, the fastest annual increase seen in over a year. It left output so far in 2016 at 672.96 million tonnes, up 0.7% on the levels of a year earlier.
Reflective of the boost in steel output, electricity output grew by 8% year-on-year, leaving it up 3.9% compared to the same period in 2015.
Growth in glass and cement output also accelerated in year-on-year terms compared to the levels reported in September.
Elsewhere coal output slumped 12% from a year earlier to 281.85 million tonnes. Year to date output dropped to 2.74 billion tonnes, down 10.7% on a year earlier.
While the increase in headline industrial output was roughly in line with expectations, the news on retail sales was a disappointment, at least compared to the lofty standards now expected from the Chinese economy.
They grew by 10% in nominal terms from the levels of a year earlier, well below the 10.7% pace seen in the 12 months to September. Economists had been expecting an unchanged reading in October.
It was the weakest year-on-year growth recorded since May.
In real terms, adjusted for inflation, real retail sales grew 8.8% from a year earlier, down on the 9.6% pace reported in September.
Not a great sign for household consumption, now a major part of the Chinese economy.
However, it wasn’t all bad news.
Urban fixed asset investment was the one area to outperform, growing by 8.3% between January to October compared to the same period in 2015.
Markets had been expecting an increase of 8.2%, unchanged from the level seen in the first three months of the year.
Fixed asset investment has now accelerated in year-on-year terms over the past two months, and is now growing at the fastest pace since June.
According to the NBS, investment from private firms grew by 2.9% this year compared to the same period a year ago, overshadowed by a 20.5% increase in public investment over the same period.
Despite the gap between public and private investment, the gap between the two narrowed compared to the levels reported in September.
Private investment accounts for around 60% of total investment in China.
“Although state sector investment remains strongest, much of the recent recovery has come from a marked rebound in private investment, which had stagnated earlier this year,” said Julian Evans-Pritchard, China economist at Capital Economics.
Property investment grew by 6.6% year-to-date year-on-year, faster than the 5.8% pace seen in September.
Despite the rebound in investment seen in October, Evans-Pritchard says the factors underpinning the recovery will likely diminish in early 2017.
“We expect growth to hold up well for another quarter or two,” he said following the release of the October data.
“However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year.”
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