High-frequency data indicate that China’s economic activities stabilized and recovered in October following the introduction of a package of stimulus measures in late September, alongside the implementation of existing policies.
Industrial output expected to grow by 5.6% in Oct
A survey of economists at 13 domestic and international institutions shows that, China’s industrial production is expected to grow by 5.6% in October from the previous month, picking up from the 5.4% growth in September, with the forecasts ranging from 5.2% and to 6%.
China’s official Manufacturing Purchasing Managers’ Index (PMI) for October picked up by 0.8 percentage points to 52 in October, 1.3 percentage points higher than the seasonal average in the past five years, reflecting a clear improvement in production due to the recent supportive policies and the effect of existing policies, said Citic Securities.
High-frequency data point to marginal improvement in the industrial economy. The year-on-year drop in daily crude steel output, operating rate at rebar steel mills, wire rod mill operating rates and furnace operating rates at 247 steel mills narrowed in October from September, and China’s overall industrial output is expected to grow by about 5.8% year-on-year in October, Citic said.
The pickup in the production sub-index in the official manufacturing PMI in October was mainly driven by raw material manufacturing, and high-frequency data show that the growth rate of the operating rates in the raw material manufacturing industry has mostly improved from September, said CICC.
As quarter-end factors fades, industrial output is expected to grow by 5.2% year-on-year in October, estimated CICC.
Retail sales growth expected to accelerate to 3.8%
Retail sales of consumer goods are expected to grow 3.8% year-on-year in October, according to the average forecast of surveyed economists, picking up from 3.2% in September, with the forecasts ranging from 2.5% to 4.6%.
Huatai Securities expects retail sales of consumer goods to grow by 4.5% year-on-year in October. Specifically, consumer travel activities rebounded significantly in October, the daily average of the congestion index in 100 major cities rose by about 4.5% year-on-year, and box office revenue declined by 24.3% year-on-year, narrowing from 48.3% decline in September, it said.
Meanwhile, real estate-related consumption improved significantly under policy support, with the year-on-year decline in new home transaction volume in 60 major cities narrowing sharply from 32.4% in September to 8.1%. The policy of consumer goods trade-in also supported retail sales, and according to the China Passenger Car Association, wholesale car sales in the first 27 days of October grew by 8.6% year-on-year.
According to Lu Ting, chief China economist at Nomura, driven by the incremental policies, consumer confidence in large cities improved marginally, driving the year-on-year growth rate of retail sales to accelerate to 3.5% in October.
Benefiting from the consumer goods trade-in program, the retail sales of home appliances likely recovered further in October; retail sales of petroleum products likely rebounded with the rise in oil prices, while tourism revenue during the National Day holiday grew by 7.9% compared to 2019, he said.
Fixed-asset investment growth likely to stay steady
In terms of fixed-asset investment, economist expect a year-on-year growth of 3.4% for the period of January – October, unchanged from the first three quarters, with a forecast range between 3.2% and 3.7%.
CITIC Securities expects the growth to slightly accelerate to 3.5%. In terms of the three major sectors, by the end of October, the issuance of local government special bonds for the year was nearly complete, and more than 2 trillion yuan of available funds will support the growth of infrastructure investment in the fourth quarter.
Although industrial companies’ profits fell at a faster pace in September, the long-term special treasury bonds supporting equipment renewal are still in effect, and with the significant improvement in the manufacturing PMI in October, manufacturing investment is expected to maintain high growth.
High-frequency data shows that second-hand home sales maintained high growth in October, and the effects of the latest stimulus policy are still visible, with the expansion of the whitelist and acceleration of the “guaranteed delivery of homes” policy expected to narrow the decline in real estate development investment in October.
Huatai Securities believes investment growth in the first ten months will reach 3.4%, with the growth for October alone likely slowing to 3%.
High-frequency data show that the year-on-year decline in new home transaction volume in 60 cities narrowed significantly, and second-hand home sales in 26 cities turned positive, which may narrow the decline in real estate investment to 9%.
Most surveyed economist believe that export growth will accelerate in October, with the average forecast at 5.7%, 3.3 percentage points higher than the previous growth.
They forecast that the year-on-year growth rate of imports will turn negative to reach -2.0%, down by 2.3 percentage points, with a forecast range between -5.0% and 4.0%.
With the fading of typhoon effects and the lower base, export growth may pick up to 8.9% year-on-year in October, CICC estimated.
Data shows that external demand remained relatively stable in October, with the manufacturing PMI for the US and Europe slightly increasing and the Japanese manufacturing PMI declining slightly, th new export orders sub-index for the manufacturing PMI falling slightly to 47.3%, the Ministry of Transport’s data showing the year-on-year growth of port container throughput in October rising to 10.2%.
