October activity data for China showed the world’s second largest economy is struggling to regain its footing amid the myriad headwinds bedeviling policymakers in Beijing.
Industrial output rose just 4.7% YoY in October, below even the most pessimistic estimate from more than three dozen economists. Consensus was looking for 5.4%. The range was 4.9% to 6%. Industrial output plunged to a 17-year nadir in August, but rebounded the following month. In that context, the October print looks like a severe letdown.
Retail sales growth came in at 7.2% last month, down from September’s 7.8% pace, and well below the lowest estimate (the range there was 7.6% to 8.8%). Jitters about domestic demand are front and center in China. The latest trade data showed imports fell 6.4% in October, better than feared, but still a sixth consecutive month in contraction. Auto sales have fallen in 16 of the past 17 months. The latest read on retail sales will only serve to heighten concerns.
YTD fixed asset investment came in at 5.2%, that’s also a miss. The surveyed jobless rate dropped to 5.1% from 5.2%.
The latest activity data comes on the heels of the hottest CPI inflation report in some seven years. Surging pork prices have driven up costs for consumers, while PPI deflation seemingly becomes more entrenched by the month. That’s a highly undesirable mix for the PBoC. Monetary easing to combat the disinflationary trend in factory-gate prices risks exacerbating the pain for consumers coping with food inflation that’s running at 15.5%.
Credit growth collapsed in October, beyond the expected seasonal effect, suggesting lackluster demand trends for credit are undermining official efforts aimed at stimulating the flagging economy, which grew at the slowest pace in three decades in the third quarter. Some analysts believe growth could decelerate below 6% as soon as this quarter.
Oh, and meanwhile, Japan’s economy decelerated rapidly in the third quarter. GDP grew at an annualized 0.2% clip in the period, all the way down from a revised 1.8% in Q2. Economists were look for a 0.9% expansion.