BEIJING (Reuters) - China’s economic growth slowed more than expected to 6.0% year-on-year in the third quarter, the weakest pace in at least 27-1/2 years, as demand at home and abroad faltered amid a bruising Sino-U.S. trade war.
Friday’s data marked a further loss of momentum for the economy from the second quarter’s 6.2% growth, likely raising expectations that Beijing needs to roll out more measures to ward off a sharper slowdown.
Analysts polled by Reuters had forecast gross domestic product (GDP) to grow 6.1% in the July-September quarter from a year earlier.
KEY POINTS
* Q3 GDP +6.0% y/y (f’cast +6.1%, prev +6.2%)
* Q3 GDP +1.5% q/q (f’cast +1.5%, prev +1.6%)
* September industrial output +5.8% y/y (f’cast +5.0%, prev +4.4%)
* September retail sales +7.8% y/y (f’cast +7.8%, prev +7.5%)
* Jan-September fixed asset investment +5.4% y/y (f’cast +5.4%, Jan-Aug +5.5%)
* China Jan-September property investment +10.5% y/y
COMMENTARY:
MITUL KOTECHA, SR EMERGING MARKETS STRATEGIST, TD SECURITIES, SINGAPORE
“The numbers could have been worse. If anything there was some fear it might drop below 6% but that didn’t happen. What’s overshadowing this is, from the point of view of sentiment, for now anyway, is the industrial production numbers. It highlights that there is a bit of a glimmer of hope on the manufacturing side and some hope that trade progress will help further.”
FRANCES CHEUNG, HEAD OF MACRO STRATEGY FOR ASIA, WESTPAC BANKING CORP, SINGAPORE
“While GDP was a tad below expectation, this series have been very stable that the market may not pay too much attention to as long as it has not dipped below 6%.
“The monthly data shows some return of growth momentum, but it was unclear as to what was behind the strong production of some goods such as machineries and telecommunication products.
“Overall it is a mixed bag of outcome. With the constructive backdrop for risk sentiment today the market may tend to have a positive interpretation. But after the initial – likely mild reaction, the market is likely to look past it.”
HO WOEI CHEN, ECONOMIST, UOB, SINGAPORE
“It is actually in line with our forecast. I think the tertiary sector’s stability, or rather the improvement in the tertiary industry is very important for China. Around half of growth is actually contributed by the tertiary industry.”
“But I think the slowdown is set to continue. There is a lot of uncertainty, still, regarding the U.S.-China trade agreement. I think the Dec. 15 tariffs will have very important implications for Chinese growth in 2020. Beijing’s approach has been rather measured and targeted and they will continue to be so.
“I think they will continue to take interest rates lower via the loan prime rate, but it’s not going to be a big drop, it’s going to be gradual. I think fiscal policy wise there’s a lot more they can do.”
BACKGROUND:
- China’s economy has been slowing since last year as the trade war with the United States takes a toll on factory activity, exports and domestic demand, suggesting that a spate of stimulus measures including tax cuts and easier lending rules are yet to have a notable effect on overall growth.
- The outlook is unlikely to change for the better any time soon even though the trade tensions between Beijing and Washington have eased somewhat.
- U.S. President Donald Trump said last week the two sides had reached an agreement on the first phase of a deal and suspended a tariff hike, but officials said much work still needed to be done.
- The International Monetary Fund has warned the trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, but said output would rebound if the dueling tariffs were removed.
- Beijing has relied on a combination of fiscal stimulus and monetary easing to weather the current slowdown, including trillions of yuan in tax cuts and local government bonds to fund infrastructure projects and efforts to spur bank lending.
- But the economy has been slow to respond with business confidence shaky and local governments facing increasing strains as tax cuts hit revenues, weighing on investment.
- Analysts in a Reuters poll expect the People’s Bank of China (PBOC) to ease policy further by cutting banks’ reserve retirement ratios and the one-year loan prime rate, a new benchmark lending rate.
- China’s economic growth is expected to cool to 6.2% this year, a near 30-year low, according to a Reuters poll. The economy grew 6.6% last year.
Reporting by Asian bureaus; Editing by Subhranshu Sahu
Source : Reuters