Lagging economic data from China showed a mixed recovery in the third quarter, with unemployment rising and retail sales weakening in September despite a pickup in growth.
Gross domestic product grew 3.9% in the July-September period from a year earlier, recovering from nearly stagnant growth in the second quarter when Shanghai was still in lockdown. The figure was stronger than the median estimate of 3.3% in a Bloomberg survey of economists.
The data was delayed by almost a week as the country held its 20th party congress, a key political event during which President Xi Jinping secured a third term as head of the ruling Communist Party and consolidated his power.
Monthly indicators for September painted a weaker picture. After four months of declines, unemployment rose to 5.5% in September from 5.3% in August. Retail sales growth slowed to 2.5%, compared with a 5.4% rise in August and below the 3% estimate.
Industrial production rose 6.3% in September from a year earlier, more than August’s 4.2% rise and beating economists’ forecast of 4.8%. Fixed asset investment increased 5.9% in the first nine months of the year, mostly in line with expectations.
The “biggest takeaway” is that “Covid is still driving the economy,” said Iris Pang, chief economist for Greater China at ING Groep NV, noting that the recovery was largely based on investment and industrial production.
Easing port closures helped smooth supply chains, contributing to a rebound in industrial output, Pang added. However, retail sales were affected by the quarantine measures.
“For politics, a turnaround from the Zero Covid policy and resolution of the developer funding crisis remains top of mind,” said Michelle Lam, Greater China economist at Societe Generale SA.
markets it fell on Monday, as investors reacted to Xi’s move to fill the nation’s leadership ranks, unveiled at the party’s congress over the weekend, with loyalists. The benchmark CSI 300 index extended declines as much as 1.9% at 10:25 a.m. in Shanghai, while the onshore yuan weakened 0.4% to 7.2541 per dollar. Play video
Housing decline continues
The real estate sector shrank for the fifth consecutive quarter, according to NBS industry output data, extending its longest decline in history.
Home prices fell for the thirteenth month in a row in September. Real estate investment fell 8% in the first nine months of 2022 from the same period a year ago, deepening August’s decline. Despite government policies to support the market, many debt-laden developers are still struggling to complete projects, while homebuyers’ confidence in future home prices has plummeted to the lowest level on record.
The country also launched Commercial data Monday shows a slowdown in export growth in September. Exports in US dollar terms expanded 5.7% last month from a year earlier, down from 7.1% in August, while imports increased 0.3%, unchanged from the previous month . That data was also delayed by the party congress.
High-frequency data for this month points to continued weakness, with new home sales in the top 30 cities falling 21% from a year ago during the week ending Oct. 18, according to Citigroup Inc. The meter was 20% below the pre-pandemic level last week, basically unchanged from the level at the end of September, while export shipping prices fell further, suggesting weaker global demand. Tourism income of the week-long national holiday earlier this month indicated a 26% drop from last year’s levels.
What Bloomberg economics says…
“There’s more going on in China’s economy than the rebound represented by excess third-quarter GDP growth, and it’s not a healthy picture. Consumption slowed sharply in the last month of the quarter, real estate investment continued to contract significantly, and unemployment rose unexpectedly. The slowdown in exports pointed to the weakening of support from external demand. — Chang Shu and Eric Zhu, economists
China’s economy in the third quarter was threatened by a series of smaller covid outbreaks across the country that resulted in mobility restrictions and hit consumer and business confidence. However, during a speech after the closing of the congress, Xi said that China’s economy is “resilientand promised to deepen economic ties with other countries.
“China cannot develop in isolation from the world. The development of the world also needs China,” Xi said, addressing an audience of Chinese and foreign journalists.
The economy has come under enormous pressure, with economists now forecasting growth of just 3.3% for all of 2022, well below the official target of around 5.5% set earlier this year. Officials began downplaying that goal in recent months as it slipped out of reach, instead focusing on job stability and other metrics.
Officials on Monday touted a recovery in “leading indicators,” which “have recovered and stabilized to remain within a reasonable range,” the NBS said in a statement accompanying the data on GDP, retail sales, production industrial and other figures.
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