China's economy delivered mixed signals in October, with retail sales outpacing forecasts while the nation's beleaguered property sector continued to decline, underscoring the delicate balancing act facing policymakers as they navigate a challenging economic landscape.
Retail sales climbed 4.8% year-on-year in October, beating a 3.8% forecast from a Reuters poll and accelerating from 3.2% growth in September, according to data released Friday by the National Bureau of Statistics (NBS). The stronger-than-expected retail performance was driven by robust consumer activity during China's week-long National Day holiday and the Singles' Day shopping festival, which saw major e-commerce platforms report a 26.6% surge in sales to 1.44 trillion yuan, per data provider Syntun.
"China's economy improved further at the start of Q4, thanks to stronger-than-expected consumer spending," noted Zichun Huang, China economist at Capital Economists. "We anticipate that faster fiscal spending will continue to support a cyclical pickup in activity over the coming months."
However, industrial production growth slowed slightly to 5.3% in October from a year earlier, falling short of a 5.6% forecast and just below September's 5.4% pace. Fixed asset investment grew by 3.4% year-to-date, but this was marginally below expectations and matched September's figure.
The property market continues to be a drag on the broader economy. Investment in real estate plummeted 10.3% year-on-year for the January-October period, deepening from a 10.1% decline reported in September. It marks the steepest contraction since August 2021. NBS spokesperson Fu Linghui highlighted "active improvement" in the sector and reiterated China's pledge to stabilize the property market, though challenges remain apparent.
"On the property side, conditions remain weak," said Xing Zhaopeng, senior China strategist at ANZ. "There have been no significant improvements in property investment, sales, or prices." Recent measures, including tax incentives for home and land transactions, reflect Beijing's intent to stabilize the sector, though a robust recovery appears distant.
The unemployment rate in urban areas dipped to 5% in October, a slight improvement from 5.1% in September. Youth unemployment figures, which had surged to record highs earlier this year, have also eased modestly, reflecting a tentative rebound in the labor market.
Amid these economic crosscurrents, Chinese authorities have ramped up stimulus efforts. The government has introduced a five-year, 10-trillion-yuan ($1.4 trillion) fiscal package to address local government debt and implemented targeted support for the property and manufacturing sectors. The People's Bank of China has also cut interest rates and extended support measures for the real estate market.
Manufacturing activity has shown signs of stabilization, with recent surveys indicating a modest pickup. However, export growth remains fragile, reflecting global demand fluctuations. Imports, meanwhile, contracted, highlighting lingering softness in domestic demand.
Looking ahead, analysts are cautiously optimistic. "The recent policy measures are yielding some positive economic effects," said Fu Linghui. But he warned of persistent headwinds and emphasized the need to "double down" on policy implementation to achieve China's 2024 economic growth target of around 5%.
International pressures also loom large. With the U.S. presidential election ushering in a potential return of Donald Trump, who has vowed to impose higher tariffs on Chinese goods, the prospect of renewed trade tensions adds uncertainty. "We expect Chinese policymakers to cut policy rates considerably and expand the fiscal deficit to counteract cyclical growth headwinds," economists at Goldman Sachs noted in a recent report.
Despite these challenges, some areas of the economy are showing resilience. Infrastructure and manufacturing investments have ticked up, while consumer spending, buoyed by targeted programs, remains a relative bright spot. "China's outlook hinges on maintaining economic momentum through the ongoing stimulus measures while navigating both domestic challenges and external uncertainties," Huang of Capital Economists concluded.
