China retail sales, factory output grow more than expected in October

By Michelle Toh, CNN

Hong Kong (CNN) — China’s retail sales and factory output grew more than expected in October, official data showed on Wednesday, even as the country’s crisis-hit real estate sector continued to drag on the economy.

Retail sales surged 7.6% last month compared to the same period last year, according to the National Bureau of Statistics (NBS), when pandemic restrictions were still limiting activity. That’s higher than the 7% growth estimated in a Reuters poll of analysts.

Industrial output expanded 4.6% in October, higher than the 4.4% rise forecast by the Reuters poll, while fixed asset investment expanded by 2.9% in the first 10 months of the year, compared to the same period in 2022. That was lower than a forecast of 3.1%.

“The economy continued to muddle through in October,” Larry Hu, chief China economist for Macquarie Group, wrote in a Wednesday research note. “Consumption accelerated on a low base, while property remains the biggest drag [on growth].”

Investment in real estate development fell 9.3% year-on-year in the first 10 months of the year, according to NBS data.

In September, China rolled out a flurry of measures, including loosening requirements for homebuyers across the country, intended to shore up the beleaguered industry.

The industry, which has accounted for as much as 30% of gross domestic product, remains troubled. Last month, Country Garden, formerly China’s largest homebuilder, was declared to have defaulted on its debt after failing to make a bond repayment by a final deadline of October 18.

Rising on low base

Much attention was paid to retail sales because that’s where “most hopes for an economic pickup” were concentrated, ING economists noted in a report Wednesday.

The larger-than-expected jump of 7.6% was accrued against a low base of comparison. Retail sales in October 2022 contracted by 0.5%, compared to the same month a year earlier, because many cities were in the midst of pandemic lockdowns or other restrictions.

After accounting for the modest base, the new data suggests that China’s overall recovery is “sputtering, but still has legs,” Capital Economics wrote in a report Wednesday.

The consumption data showed that the economy struggled to regain strong momentum at the start of the fourth quarter, “but it was not nearly as weak as some had feared,” with consumer confidence ticking up, they added.

Goldman Sachs analysts said Wednesday that the data reflected “a mixed bag,” saying they would make no change to an earlier forecast of 5.6% economic growth for the fourth quarter compared to the same period last year.

The October period encompasses China’s eight-day Golden Week holiday, one of the country’s peak vacation periods. This year, despite hopes for a rebound in consumption, key travel and spending data fell short of government forecasts.

Last month, consumer prices in China also fell more than anticipated, sliding the country back into deflation and renewing concerns about the strength of the world’s second largest economy.

While the drop was mainly attributed to falling food prices, particularly pork, economists said it also reflected muted consumer demand.

— CNN’s Juliana Liu contributed reporting.

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