China’s economy slowed further in November, dragged down by a worsening housing market downturn and disruptions from repeated Covid outbreaks, undermining consumer spending.
The growth of investment in fixed assets moderated to 5.2% in the first eleven months of the year. Real estate investment grew 6% in the same period, slowing from 7.2% during the January-October period, as financing rules remained tight and home sales plummeted.
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The data highlights the downward pressure on the real estate economy and the magnitude of the challenge facing the Chinese government in stabilizing the world’s second-largest economy. Beijing has recently shifted its focus to stabilizing growth, with the central bank easing monetary policy and the Communist Party ordering more fiscal spending in 2022.
“Only when growth expectations are stable will investment and consumption recover,” said Bruce Pang, head of macro and strategic research at China Renaissance Securities Hong Kong Ltd. “That is why the authorities are implementing more stimulus packages and policy support to design such expectations. ”
Industrial production increased 3.8% over the previous year, accelerating from 3.5% in October, but the real estate market is also weighing on that sector. Sales of residential properties and the area of residential homes recently started fell about 20% from the previous year, as did the production of property-related commodities such as cement and steel.
While Beijing is expected to offer more credit and signaled some easing of controls on the property market to support “stability,” officials last week upheld the basic stance that “houses are for living, not speculation.” .
Retail sales growth weakened to 3.9% in November, falling short of economists’ forecast for a 4.7% increase. Sales in the restaurant and catering sector fell 2.7% as people stayed home amid new virus outbreaks.
Consumption weakened despite still strong sales support around the “Singles Day” shopping festival.
Earlier on Wednesday, the central bank kept the interest rate on one-year loans to banks unchanged and only rolled over about half of maturing debts, drawing liquidity out of the economy. However, a recently announced cut to banks’ mandatory reserve ratio will take effect from Wednesday, increasing the amount of money financial institutions have available to lend.
What Bloomberg Economics Says …
China’s November activity data suggests the economy is still under pressure, although the production side appears to be stabilizing. Pressure on the demand side was clear, with growth in both fixed asset investment and retail sales extending the slowdown. We expect fiscal and monetary policies to be more favorable in the coming months.
David Qu and Eric Zhu
“The international environment is increasingly complex and bleak and there are still many limitations in the national economic recovery,” the National Statistics Office said in a statement. We must “combine cyclical and counter-cyclical macro policy adjustments to stabilize the overall macroeconomy.”
The shares changed shortly after the data, with the CSI 300 index falling 0.2% at 10:38 am. The 10-year government bond yield was stable at around 2.88% and the yuan strengthened less than 0.1% to 6.3641 to the dollar.
Investment in infrastructure, another weak link in China’s slow recovery this year, increased at a slower pace of 0.5%. Local governments have stepped up their efforts to borrow money and start new projects, and Beijing has allowed authorities to start selling next year’s bonds from January 1 to speed up spending.
The surveyed unemployment rate rose 5%, while the average number of hours worked per week fell to 47.8 from a record 48.6 in October. The unemployment rate for 16-24 year olds increased slightly from 14.2% to 14.3%.
“Domestic consumption remains weak and retail sales are disappointing,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “The incremental rise in the unemployment rate is concerning. The authorities should offer more support and offer a stronger signal to the market ”.
© 2021 Bloomberg