China is heading for another ‘lackluster’ economic health check
The median forecast of economists surveyed by Bloomberg is that figures from the Office for National Statistics on Monday are expected to show retail sales rose 2.9% in November from a year earlier. This would match the weakest gain since August last year.
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It is seen that investments in fixed assets such as factories, new properties and machinery contracted by 2.3% in the January-November period compared to the previous year. According to Bloomberg calculations, this represents a decline not seen outside of the Covid crisis in figures dating back to 1998. Much of this is thanks to China’s ongoing real estate collapse.
As for industrial production, an important metric for the Chinese leadership that prioritizes manufacturing prowess, it is expected to increase by 5% in November compared to the same month last year. Despite the recovery in export growth last month, this would be only a slight increase from 4.9% in October.
Bloomberg Citigroup Inc., including Yu Xiangrong. “Most activity indicators could remain lackluster,” economists wrote in a recent note previewing the numbers. While officials have moved to inject stimulus, the effects may still be at a “very early stage” when it comes to construction-related parts of the economy, they wrote.
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A weak data set would highlight the risk of relying on external demand to stimulate the economy. Exports are expected to slow next year after a surprisingly strong 2025 as trade tensions with markets outside the US intensify.
At important economic meetings held this week, China’s senior leaders listed increasing domestic demand as the top priority in the new year and signaled caution against uncertainties in foreign trade. They have pledged to continue growth-supporting policies, although no aggressive measures are yet on the horizon.The reason for the anticipated slowdown in consumption growth in November was most likely the weakening in automobile sales and the earlier start of “Singles’ Day” than usual. Goldman Sachs Group Inc., including Lisheng Wang. According to economists, this calendar change for the online shopping promotion means moving some of the demand to October.
Automobiles account for about 9% of China’s overall retail sales, one of the largest of all categories. Retail vehicle sales fell nearly 8% last month, according to data previously shown by the China Passenger Vehicle Association; this was a rare drop, usually during the busiest time of the year. The decline accelerated in the first week of December, with sales falling 32% from the previous year, the CPCA reported.
This decline may be a symptom of a weakening of the government’s lead push to encourage consumer purchases of goods such as subsidized cars.
Nomura Holdings Inc., which includes Lu Ting. “This sharp contraction indicates an increasing redemption effect from the swap program,” economists wrote in a note Thursday. Experts estimate that the financial benefit was used in 52% of cars sold in the first 11 months of the year.
Turning to the more industrial side of the economy, the decline in investment spending in October surprised observers last month. Goldman economists said the decline was partly due to a statistical correction by the NBS to previously overreported data.
Goldman also noted the government’s “anti-revolutionary” campaign and the housing crisis, in which it sought to combat overcapacity and destructive competition.
The bank’s economists estimate that fixed asset investment fell 9.5% last month from a year earlier, following a 11.4% drop in October. NBS does not release monthly figures on an annual basis for this data series.
At the Central Economic Work Conference earlier this week, Chinese leaders pledged to support investment with measures such as increasing central government spending, optimizing the use of local special bonds and leveraging a financing tool for banks. They also promised to ease local financial woes and stabilize the real estate market.
“We will press for investment to halt its decline and stabilize,” policymakers said in a statement from the meeting released Thursday.
