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China's economic recovery quickens as consumption returns

EconomyOct 19, 2020 03:30AM ET
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© Reuters. A worker is seen on a crane at a construction site in front of Lujiazui financial district, in Shanghai

By Gabriel Crossley and Kevin Yao

BEIJING (Reuters) - China's economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution, although the weaker-than-expected headline growth suggested persistent risks for one of the few drivers of global demand.

Gross domestic product (GDP) grew 4.9% in July-September from a year earlier, official data showed on Monday, slower than the 5.2% forecast by analysts in a Reuters poll but faster than the second quarter's 3.2% growth.

"China's economy remains on the recovery path, driven by a rebound in exports. Consumer spending is also headed in the right direction, but we cannot say it has completely shaken off the drag caused by the coronavirus," said Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute in Tokyo.

"There is a risk that the return of lockdowns in Europe and another wave of infections in the United States will hurt consumer spending and trigger more job losses, which would be a negative for China's economy."

The weaker-than-expected headline figures weighed on China's yuan and mainland stock benchmarks (SSEC) (CSI300) and capped broader market gains in Asia.

The world's second-largest economy grew 0.7% in the first nine months from a year earlier, the National Bureau of Statistics (NBS) said.

Graphic - China's V-shaped recovery? https://graphics.reuters.com/CHINA-ECONOMY/GDP/qzjpqaewypx/chart.png

Policymakers globally are pinning their hopes on a robust recovery in China to help restart demand as economies struggle with heavy lockdowns and a second wave of coronavirus infections.

China has partially emerged from a record slump caused by coronavirus shutdowns in the first months of the year.

NBS spokeswoman Liu Aihua warned that growth remained patchy.

"Internally, the economy is still in the process of recovery," she told a briefing in Beijing. "Some or most of the indicators have not returned to the normal growth level, and some of the cumulative growth rate has also declined."

On a quarter-on-quarter basis, GDP rose 2.7% in the third quarter, the NBS said, compared with expectations for a 3.2% rise and an 11.5% rise in the previous quarter.

But despite the headline disappointment, analysts were encouraged by a broader upturn in consumption and continued factory strength.

Retail sales grew 3.3% in September from a year earlier, speeding up from a modest 0.5% rise in August and posting the fastest growth since December 2019. Industrial output grew 6.9% after a 5.6% rise in August, showing the factory sector's recovery was gaining momentum.

Fixed-asset investment rose 0.8% in the first nine months from a year earlier, returning to year-to-date growth for the first time this year.

In the property sector, investment rose 12% in September from a year earlier, the fastest pace in nearly 1-1/2 years, providing a key support for broader investment.

The government has rolled out a raft of measures including more fiscal spending, tax relief and cuts in lending rates and banks' reserve requirements to revive the coronavirus-hit economy and support employment.

While the central bank stepped up policy support after widespread travel restrictions choked economic activity, it has more recently held off on further easing.

The International Monetary Fund has forecast an expansion of 1.9% for China for 2020, which is close to the central bank's own projection of 2%.

That would make China the only major economy expected to report growth in 2020, albeit at the slowest annual pace since 1976, the final year of Mao Zedong's Cultural Revolution.

CONSUMERS STEP UP

China's retail spending has lagged the comeback in factory activity this year as heavy job losses and persistent worries about infections kept consumers at home, even as restrictions lifted.

However, recent indicators suggest consumer activity is now turning around.

In the travel sector, domestic passenger flights in September beat their COVID-19 levels, a sign that that segment of the market is approaching a full recovery, even as international borders remain largely shut.

Auto sales marked a sixth straight month of gains in September while Ford Motor Co 's (N:F) China vehicle sales jumped 25% in the third quarter from a year earlier.

The breakdown of GDP showed final consumption accounted for 1.7 percentage points growth, while capital formation accounted for 2.6 percentage points and net exports contributed 0.6 percentage points, NBS said.

The coronavirus outbreak, which caused China's first contraction since at least 1992 in the first quarter, is now largely under control in the country, although there has been a small resurgence of cases in the eastern province of Shandong.

"The single most important thing for the Chinese economy in the coming months is whether service consumption can catch up," said Larry Hu, head of China economics at Macquarie Capital in Hong Kong.

(This story was refiled to remove extraneous word in paragraph 2)

China's economic recovery quickens as consumption returns
 

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Comments (11)
Jeff Bauman
Jeff Bauman Oct 19, 2020 7:58AM ET
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all lies, like Chinese propagandist David Wrong aka David9
Jack Zhang
Jack_A Oct 19, 2020 6:15AM ET
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I am here to see comments: Trump moon, Diden moon, Communist moon. LoL
David David
David9 Oct 19, 2020 2:59AM ET
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I told you guys...China's returning to growth and normacy already. Consumption is picking up and data shows that growth will be much stronger going forward...
perplexed76 .
perplexed76 . Oct 19, 2020 2:59AM ET
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and who consume their "growth"? the martians?
David David
David9 Oct 19, 2020 2:59AM ET
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Everyone does...China is still the world's production powerhouse. Go look at your underwear tag and see that it shows Made in China....
perplexed76 .
perplexed76 . Oct 19, 2020 2:59AM ET
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David David  you right, amidst pandemia people used to buy more china pants.
David David
David9 Oct 19, 2020 2:59AM ET
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Yes, everything, that includes the red MAGA hats and flags....
Brandon Son
Brandon Son Oct 19, 2020 2:51AM ET
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fake numbers for sure
perplexed76 .
perplexed76 . Oct 19, 2020 2:03AM ET
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if your position (and freedom?) depends on digits that you send to central communistic Bureau, your numbers are always high.
Adamo Nals
Adamo Nals Oct 19, 2020 1:26AM ET
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And rightfully so President Trump is cracking down on China. This should’ve been done 40 years ago when I started trading
Adamo Nals
Adamo Nals Oct 19, 2020 1:25AM ET
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Just think about it it’s 1.2% annual GDP growth in the United States. Where from 2012 to 2020 they average 7 1/2%. It’s not good. You need to see a couple more quarters. But we all know it’s going to get worse. That’s just reality
bruce johnson
bruce johnson Oct 19, 2020 12:46AM ET
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China is going down on Trump relection. Obama Bidens to prison
Mike Bostic
Mike Bostic Oct 18, 2020 10:54PM ET
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china is the only economy to finish with positive economic growth for 2020.
Jeff Bauman
Jeff Bauman Oct 18, 2020 10:54PM ET
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it's lies. wake up
Adamo Nals
Adamo Nals Oct 18, 2020 10:25PM ET
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4 times the amouny of people = 1.2%gdp growth comparitively to usa. Not good at all.
Adamo Nals
Adamo Nals Oct 18, 2020 10:25PM ET
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It’s an absolute travesty and shame that these people are living in such Poverty. It shows that communism does not work. Everything must be done to help people not corporations
Adamo Nals
Adamo Nals Oct 18, 2020 10:25PM ET
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End it does matter. If you want to talk about GDP adjusted per capita, it’s 1.2% GDP growth in the United States. That would be and is terrible.
Kelvin Lada
Kelvin2020 Oct 18, 2020 10:16PM ET
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Disappointed who? That's a great number. The rest of the world will catch up should there be a vaccine soon
Jeff Chevalier
Jeff Chevalier Oct 18, 2020 10:16PM ET
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China typically is in the high single digits. The rest of the world is excited like kids at Christmas if they hit 4%.
 
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