China's main growth engines falter in Oct on trade frictions

Daniel Fowler
November 16, 2019

China's economy slowed further in October, signaling that policy makers' piecemeal stimulus is failing to boost output and investment amid ongoing trade tensions with the USA and subdued domestic demand.

China's value-added industrial output in October rose 4.7% from a year earlier, slowing from September's 5.8% increase, the National Bureau of Statistics said Thursday. Forecasts had been for 5.4 percent.

Property sales by floor area, a key barometer of demand, rose 1.9 per cent on year in October, also the slowest since July and lower than September's 2.9 per cent growth.

For the first 10 months of 2019, China's production of pig iron rose 5.4% year on year to 675.18 million mt, and that of steel products expanded 9.8% to 1.01 billion mt.

Meanwhile, China's property investment and sales growth eased to three-months lows in October, suggesting a critical pillar of the economy is softening.

This brought production in January-October to 829.22 million mt, up 7.4% from the same period a year earlier.

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Indicators showed other sectors also slowing significantly and missing forecasts with retail sales growth back near a 16-year trough and fixed asset investment growth the weakest on record.

The service sector is playing an increasingly important role in the Chinese economy, contributing 60.6 percent of the country's GDP growth during the first nine months.

Economists wonder if the rapid rise in pork and other food prices might be playing a part in forcing consumers to curtail spending to allow themselves to keep buying pork, which is the main meat protein in China. "The case for further monetary easing remains intact".

"Admittedly, optimism surrounding a phase-one US-China trade deal could provide a boost to corporate investment in the near term", Capital Economics China Economist Martin Lynge Rasmussen said.

In a bid to stop this trend, China's State Council on Wednesday pledged to lower the minimum capital ratio requirement for some infrastructure investment projects.

China's key economic activity continued to slow in October as several major indicators posted multi-month or even multi-year lows, official data showed Thursday.

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