China: Growth momentum is worse than headline figure – ANZ

Economists at the Australia and New Zealand Bank (ANZ) offered their take on Friday’s release of the Chinese GDP report, which showed that economic growth eased further to a near 30-year low level of 6.0% during the third quarter of 2019 and marked a further loss of momentum.

Key Quotes:

With China’s GDP having expanded 6.2% on a year-to-date basis in Q3, we believe it is likely that the economy will maintain full-year growth at 6.0% in 2019 unless GDP growth falls below 5.5% y/y (or 1.0% q/q) in Q4.
 
In nominal terms, China’s GDP growth has retreated to 7.6% y/y in Q3 from 8.3% in Q2, signalling that the economy is slowing at a quicker pace than what the headline figure indicates.
 
We also notice that China’s industrial production (IP) data tend to rise at quarter-ends in 2019. For instance, the headline growth rates rose 1.4ppt in September, and 1.3ppt in June.
 
The increase in retail sales in September does not point to a broad-based recovery in consumption.
 
To further support economic growth, fiscal policy is the only viable tool. However, Chinese policymakers will also need to address existing funding constraints faced by local governments.