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China’s economy found a foothold in the third quarter as the government increased support and consumer spending picked up, while the property market remained a drag.
Gross domestic product increased 4.9% in the July-September period from a year prior, data released by the National Bureau of Statistics showed Wednesday. Compared to the second quarter, GDP grew 1.3%. Both figures surpassed economists’ expectations.
Retail sales jumped 5.5% in September, well above forecasts and the highest reading since May. The jobless rate inched down to 5%, the lowest since November 2021.
“While risk of a slower growth for next year remains on the table, the short-term economic momentum has at least cleared some of the clouds over the economy,” said Zhou Hao, chief economist at Guotai Junan International in Hong Kong.
The yuan rose 0.2% in both onshore and offshore markets. The Hang Seng China Enterprises Index climbed 0.5% after the data release, erasing an earlier drop of 0.8%. Crude oil extended gains and copper added 0.7%. The yield on 10-year Chinese government bonds was little changed.
Economic activity has shown some signs of stabilization in recent weeks as government support began to take hold. Factory activity has gradually picked up, a drop in exports is slowing and household consumption is recovering.
That’s provided hope that China can achieve a government growth target of about 5% for the year.
“The growth target of 5% is set to be achieved,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. For next year, “the key issue is what growth target the government will set and how much fiscal easing will take place.”
Other sectors aren’t holding up as well: The property sector remains a significant drag as home sales continue falling and a credit squeeze among developers widens — with the clock ticking for Country Garden Holdings Co. to avert its first public dollar bond default.
Consumer spending during this month’s Golden Week holiday period wasn’t as robust as the government had hoped, and deflation risks are persistent.
The economy’s performance “laid a solid foundation for achieving the full-year development targets,” the NBS said in a statement, though it warned of an “even more complicated and severe” external environment, as well as insufficient domestic demand.
The better-than-expected retail sales data reflected improved consumer spending in several categories, from restaurants, food and clothing to cars.
The housing slump was evident, with purchases of furniture, construction material and home electronics still subdued.
On a year-on-year basis, growth was expected to soften in the third quarter from the 6.3% pickup in the April-to-June period. That’s largely due to the base of comparison with last year, which was after the lockdown in Shanghai lifted.
Even so, weakness within the economy is likely keeping Chinese leaders on watch for whether to roll out more support in a bid to keep the recovery on track.
“The investment aspect remains weak, but consumption seems to have recovered nicely,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “We believe the policymakers will focus more on financial stability. Stimulus measures will be ‘measured.’”
Authorities are considering issuing more sovereign bonds this year to spend on infrastructure, Bloomberg News reported last week, as well as mulling ways to shore up stock market confidence. Economists also expect China to further cut interest rates and banks’ reserve requirement ratio this year.