(Bloomberg) -- Chinese consumer spending outperformed expectations in October, providing a needed boost to the world's second-largest economy as policymakers weigh more stimulus to support the rebound into the new year.
Retail sales climbed 7.6% from a year earlier, the National Bureau of Statistics said Wednesday, a better-than-forecast result aided in part by favorable comparisons to a weak month in 2022. October also captured the week-long Golden Week holiday period. Industrial production rose 4.6%, also higher than projections.
There were still obvious signs of weakness elsewhere: Growth in fixed-asset investment slowed to 2.9% in the first 10 months of the year, worse than forecasts and lower than in the period through September. A worsening contraction in property investment contributed to the poor figures.
“China's economy seems to have averted fears about a broader sequential slowdown in October,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong.
“With that being said, the devil is in the details,” he said, noting the drag in real estate investment and adding that official strategies to restructure debt in the property sector will take several years to resolve. “Policy support is still needed in order to address concerns around domestic sentiment and housing demand.”
The yuan traded offshore pared losses to drop 0.1% after the data was released, while the onshore yuan was little changed. The yield on China's 10-year government bonds steadied at 2.66%. Key stock indexes largely maintained earlier gains, with the onshore CSI 300 Index rising as much as 1.1% and the Hang Seng China Enterprises Index up 2.8%.
While the economy outperformed expectations in the July-to-September period, recent indicators have pointed to weakening momentum and demand as the final quarter kicked off. Official and private surveys showed factory activity contracting and growth in services moderating. A drop in exports worsened, consumer prices dipped back into deflation and borrowing by households and companies was muted.
Policymakers are taking steps to add stimulus to help the economy, including via an unconventional mid-year budget revision and the approval of 1 trillion yuan ($138 billion) worth of sovereign bonds for infrastructure investment last month. Just before the data was released, the People's Bank of China injected the most cash since 2016 through its medium-term lending facility on Wednesday to support funding for growth.
Beijing is also planning to provide at least 1 trillion yuan of low-cost financing to the nation's urban village renovation and affordable housing programs to help the property market, Bloomberg News reported.
The NBS highlighted the improvement in major indicators in its statement accompanying the data, adding that the economy “operated stably overall.” But it noted ongoing challenges from external uncertainties and insufficient domestic demand, adding that “foundation of the economic rebound still needs to be solidified.”
Some economists cautioned that consumer sentiment is still not on a completely sure footing. October retail sales grew at a similar pace as compared to September, according to Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd., who added that “domestic demand is still weak.”
“Consumer activities remain a little bit downbeat in China because of the poor consumer sentiment, as well as the negative wealth effect coming from the property market,” said Jacqueline Rong, chief China economist at BNP Paribas SA, in an interview with Bloomberg TV.
Even so, Rong said the data confirmed that China is “definitely in a mild economic rebound,” adding that growth is on track to overshoot the official target of around 5% for 2023.
For investors and analysts, that means attention is turning to the economy's real momentum and longer-term perspectives. The persistent property crisis, China's aging population and low business growth remain serious concerns.
--With assistance from James Mayger, Iris Ouyang, Zhu Lin, Lucille Liu and Ocean Hou.
(Updates throughout.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.