Chinese economic slump makes recovery look tepid
BEIJING - Reuters
REUTERS photoChina likely hit the bottom of a seven-quarter long economic downturn between July and September, but the slowest three months of growth since the depths of the financial crisis and a cloudy housing market outlook make recovery prospects tepid.
GDP grew 7.4 percent in the third quarter from a year ago, the National Bureau of Statistics (NBS) said, in line with forecasts of economists polled by Reuters who expected the first miss of the official target since Q1 2009’s 6.5 percent.
Industrial production, retail sales and investment data were all slightly ahead of forecasts, however, and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world’s number two economy will pick up in the final quarter - as a once-a-decade leadership transition gets under way in Beijing.
“Those fearing a hard landing will be able to sleep a little better tonight, but those positioned for a clear recovery might be disappointed,” Alistair Thornton, senior China economist at IHS Global Insight wrote in a client note.
“The picture is one of emerging stabilization, not the return of unbridled optimism.”
Annual economic growth in the first nine months of the year was 7.7 percent, down slightly from a 7.8 percent rate in the first half of the year, but the NBS insisted China would meet or exceed the government’s official 2012 target of 7.5 percent.
“We have 7.7 percent growth in September, which laid a solid foundation for achieving the full-year growth target. So we are confident that we can achieve 7.5 percent full-year growth or above,” NBS spokesman, Sheng Laiyun, told a news conference.
Riskier assets reacted positively, with Asian shares outside Japan rising to a 7-month high, while the Australian dollar, sensitive to Chinese demand for industrial commodities, touched its highest in two weeks.
GDP growth at 7.4 pct
While GDP growth at 7.4 percent would be cause for joy in recession-stalked developed economies, it represents a sharp slowdown for China, where GDP grew 9.2 percent in 2011 and has averaged an annual rate around 10 percent for three decades.
Fixed-asset investment rose 20.5 percent in January-September from a year earlier, ahead of the 20.2 percent consensus forecast, although still down from around 25 percent seen for most of last year.
Consumption also quickened, with retail sales in September expanding by 14.2 percent year-on-year, ahead of the 13.2 percent forecast, which would have been unchanged from August.
Growth in factory output came in at 9.2 percent, slightly ahead of both the 9.0 percent forecast and August’s 8.9 percent.
Meanwhile the NBS revised five prior quarters of seasonally adjusted GDP data to show the economy bottomed in Q1.
“We prefer to exercise the usual caution in interpreting these numbers, given the seemingly conflicting trends in other data (such as PMI, corporate profits, trade, etc.) in the first half of this year,” Yao Wei, chief China economist at Societe Generale in Hong Kong, wrote in a note to clients.
The biggest upside surprise in the data flurry also carried the biggest health warning - a quarter-on-quarter surge of 2.2 percent in the third quarter, implying an annualized growth rate of 8.8 percent.
It was far ahead of the second quarter’s 1.8 percent growth, a level that investors had expected to hold steady.