China’s economic growth slowed in October

China’s official October economic figures indicate a continued slowdown in Chinese economic activity. Retail sales, which grew by just 2.7 % y-o-y in real terms, showed their weakest monthly performance this year. In September, growth was still 3.5 %, and last spring around 6 %. Tepid domestic demand was also evident in bank lending growth, which fell to a historically low level of 6.3 % y-o-y. Nearly all growth came from corporate lending, while household loan stock was only half a percent higher than a year ago.

The consumer confidence index of the National Bureau of Statistics (NBS) rose a smidgen in September and October. Despite improvements in the willingness of households to consume and their expectations for income growth since summer, confidence about the employment situation remained low. This reflects uncertainty in the labour market and could slow the recovery of consumption. Consumer price inflation in October rose to 0.2 %, due largely to higher prices for services. Core inflation accelerated to 1.2 %, while the decline in producer prices eased slightly to 2.1 % (d0wn by 2.3 % in September).

Real growth in industrial output slowed to 4.9 % y-o-y, down from 6.5 % in September. The slowdown was due mainly to weak trends in the manufacturing and mineral extraction sectors. The differences across branches were large, however, with significant growth, for example, continuing in the car industry and production of computers and communications equipment, and production declines in the steel and cement industries.

The slowdown in industrial output could also be seen in foreign trade. The dollar-value of goods exports fell in October for the first time in many months, sliding by 0.8 % y-o-y. Export prices were nearly 4 % lower than a year ago, partly accounting for the contraction. Nevertheless, growth in the volume of exports also slowed significantly, coming it at just 3.2 % y-o-y for October. Some of this slowing simply reflects last year’s high reference basis as export growth soared to exceptional heights in late 2024. Goods exports to the United States continued to fall sharply (-25 % y-o-y in value terms) and now also to countries such as Japan (-6 %) and South Korea (-13 %). Although export growth to ASEAN countries and Taiwan remained robust, it, too, slowed slightly. The value of goods exports to the EU grew by 1 % from October 2024. The value of China’s goods imports grew by 1.4 % y-o-y, due largely to higher unit prices (up over 2 %). In contrast, import volumes contracted by 0.6 %, reflecting weak domestic demand and flagging fixed investment rates.

The NBS reports that nominal total fixed investment contracted by 1.7 % y-o-y in the first ten months of the year, compared to -0.5 % in January-September. This means the decline in fixed investment accelerated further in October. The collapse in real estate construction continued to drag down investment overall. In October, real estate investment decreased by over 23 % y-o-y, the volume of new building starts (measured in floorspace) fell by nearly 30 % and the volume of apartment sales (measured in floorspace) declined by nearly 20 %.

China’s economic growth slowed in October, and the real estate sector downturn continued

Sources: National Bureau of Statistics, CEIC and BOFIT.