Now here’s an unexpected surprise. Chinese government data out yesterday revealed that growth in retail sales and industrial production last month slowed unexpectedly as expansion in fixed asset investment dipped more than anticipated hit the lowest growth rate for 18 years.
Reuters wondered if the news was a sign that the move by Chinese regulators to push up interest rates to try and slow speculative activities in the economy, was now having a broader impact.
And the Wall Street Journal reported: “Officials blamed August’s slowdown on bad weather but economists say a clampdown on credit, a cooling property market and waning effects from previous stimulus measures may have all dampened domestic demand."
The figures were contrary to the start of month upbeat data on the health of China’s manufacturing sector and stronger than expected imports in the same month. Conversely exports were lower than forecast, but the trade surplus was still more than $US421 billion
Retail sales surprised on the downside in August, growing 10.1% year on year against expectations of a 10.5% rise from economists. They were up 10.4% in July.
The softness in consumer spending came as growth in urban fixed-asset investment slowed to a 7.8% for the eight months ended August, down from 8.3% at the end of July.
State-controlled firms were more active, however, with investment up 11.2% for the period compared to a rise of 6.4% from privately-owned companies.
Industrial production disappointed as well, slowing 0.4% from the previous month to notch growth of 6% in August (the weakest for nine months), against expectations of a rise to 6.6%.
However, China’s crude steel output hit its third record in a row last month – with production rising by 8.7% from 68.5 million tonnes a year earlier to 74.6 million tonnes and up on the previous record monthly total of 74 million tonnes in July. Iron ore and coal imports both rise sharply in August. In contrast, cement – another key construction related sector – saw output fall by 3.7% year on year.
China’s housing sales growth in August was the slowest in over two years, though developers kept building at a steady rate. The Wall Street Journal said China’s housing sales growth in August was the slowest in over two years. Housing sales by value in August rose 3.8% from a year earlier, according.
That compared with a 4.3% rise in July, and was the smallest increase since a contraction in March 2015. For the first eight months of the year, housing sales rose 14.2% from a year earlier, compared with a 15.9% increase from January through July.
So a definite slowdown is underway, but so far it hasn’t impacted coal or iron or imports.
Reuters reported that economists at Nomura maintained their view that the economy would expand 6.8% in the current third quarter from a year earlier, easing only slightly from 6.9% in the first half.
"I think the risk (for China) isn’t in the next couple of months but rather the next couple of years,” said Capital Economics’ Julian Evans-Pritchard. “Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks.”
In a commentary issued last nught the National Australia Bank wondered if Chinese growth was slowing.
"We have previously flagged the potential for slowing economic growth in the second half of 2017 – following the surprisingly strong results in the first half of the year. Two months of weaker fixed asset investment – particularly this month’s result – and industrial production (China’s old economy) could signal softer GDP growth this quarter.
“Our economic forecasts remain unchanged – we anticipate growth of 6.7% in 2017 (unchanged from 2016), before easing to 6.5% in 2018 and 6.25% in 2019,” the NAB wrote in last night’s note.
