Chinese data show economy slowing despite stimulus

Chinese retail sales grow at slowest pace in 15 years

Chinese retail sales grew at the slowest pace in 15 years in November and factory output was the weakest in nearly three years, in the latest signs that economic stimulus measures enacted since the summer have failed to reverse flagging growth.

Even as Chinese exports have remained resilient in the face of US tariffs, weak consumer spending and slowing investment in housing construction are weighing on China’s economy.


Friday’s data weighed on stock markets across the globe. The CSI 300 index of mainland Chinese equities dropped 1.7 per cent, Hong Kong’s Hang Seng lost 1.6 per cent, while the Europe-wide Stoxx 600 shed 1.1 per cent.

Chinese policymakers have injected cash into the banking system and fiscal authorities have pledged to increase infrastructure spending, but the latest data suggest that further measures are likely.


At a politburo meeting on Thursday, the Communist party’s top policymaking body pledged to “maintain economic activity within a reasonable range” and “further stabilise” employment, investment and foreign trade.

“We expect the government to take further measures to support the economy as downward pressures increase,” Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong, wrote on Friday.

“The recent US-China truce is a positive and we expect the overall impact of policy easing to be large enough to help economic growth bottom out around the second quarter of 2019.”

Retail sales grew 8.1 per cent in November from a year earlier, the slowest pace since 2003, while industrial production rose 5.9 per cent, the weakest in 33 months, according to data from China’s statistics bureau on Friday. Both figures were well below expectations, based on a Reuters poll.

Among retail items, sharply declining automotive sales dragged down the headline figure, while fast-moving consumables and home appliances rebounded slightly.

China’s auto market, the world’s largest, is on track for its first annual sales decline since the 1990s, while the China Association of Automobile Manufacturers forecast on Friday that sales would be flat in 2019.

“Consumers are worried that economic growth is slipping, they’re worried that their salaries aren’t increasing,” said Lin Longpeng, chief market analyst at Guotai Junan Securities in Shenzhen. “There may even be some corporate lay-offs. All this is causing a decline in consumer confidence.”

Friday’s news followed trade data released last weekend that showed that imports grew only 3 per cent in November, far below expectations of 14.5 per cent, according to a Reuters poll.


China’s imports of commodities such as oil and iron, which fuel the country’s vast factory sector, are seen as a gauge of domestic demand.

Credit and money-supply data released earlier in the week also suggested that stimulus measures have yet to produce a rise in lending that policymakers intended.

Growth in outstanding credit slowed to a record low of 10.4 per cent in November, down from 11.1 per cent in October, according to Financial Times calculations based on central bank data.

But Friday’s data contained some bright spots. Fixed-asset investment growth hit a five-month high, supported by faster spending on housing and infrastructure. But annual growth of 5.9 per cent in the January to November period was still well below 2017’s full-year pace of 7.2 per cent.

“The contraction in property sales deepened last month,” wrote Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore. “But developers continued to shrug off this weakness in demand - new housing starts and property investment both accelerated.” - Copyright The Financial Times Limited 2018