China Grows 4.5% as Factories Offset a Deepening Property Slump
The economy expanded 4.5% in the third quarter against the same period last year, up from a three-year low of 4.3% and ahead of forecasts. Growth over nine months is 4.6%, inside Beijing’s target range. Retail sales rose 1.1% and industrial output 5.5% in September, while property development investment fell 20.6% over the year to date.
The shape matters more than the headline: this is an economy being carried by its factories and foreign buyers while its households and private investors sit on their hands. The monthly trade surplus reached a record $133.5bn, fixed-asset investment fell 7.2% over nine months, and the property slump deepened rather than bottomed. Sheana Yue of Oxford Economics is blunt that “the prolonged housing slump will continue to limit the spillover from stronger industrial activity to the wider economy” and sees no sign of the sector “bottoming out”. The number that explains the squeeze is in the price data: producer prices rose 5% in September, the fastest in more than four years, while consumer inflation stays below 1%. As Ms Yue puts it, that “potentially leaves firms to absorb more of the cost shock through lower margins rather than higher selling prices”. Eswar Prasad of Cornell expects no rescue: “the government might become more sanguine and maintain a passive approach, rather than infusing stimulus.” The Economist Intelligence Unit forecasts 4.7% for the full year.