China: Economy continued to track sideways but weaker real estate could cool conditions in Q4 - NAB

Gerard Burg, Senior Economist at NAB, notes that the China’s economy grew by 6.7% yoy in Q3 – the same level recorded in both the March and June quarters.

Key Quotes

“This level was in line with market expectations, and remains within Beijing’s target range of 6.5% to 7.0%. Booming property sales helped underpinned this growth, and government efforts to cool property speculation may have a negative impact on Q4 GDP growth. Our forecasts are unchanged, at 6.6% in 2016 and 6.5% in 2017 – with risks weighted to the downside next year.

House prices continue to grow strongly and sales have remained robust, however weaker real estate investment has impacted construction. New construction starts fell in September – down 3.7% yoy on a three month moving average basis, and this trend may be further exacerbated by tighter regulations around house purchases and mortgage lending.

Mortgage lending has surged this year, with mortgages accounting for around 36% of total bank lending over the first nine months of the year – far above the longer term trend. The People’s Bank of China (PBoC) has instructed banks to rein in mortgage credit and better

Growth in China’s industrial production slowed slightly in September, down to 6.1% yoy (compared with 6.3% in August), but still in line with recent trends.

A slight month-on-month fall in China’s exports and an upturn in imports saw the country’s trade surplus narrow somewhat in September – down to US$42.0 billion (from US$52.0 billion previously).

Retail sales growth edged slightly higher in September, with growth at 10.7% yoy (up from 10.6% in August). Retail price inflation has remained subdued in recent months – meaning our estimate for real retail sales growth has remained above 10%, compared with a softer patch in early 2016.

Headline inflation picked up in September – with the Consumer Price Index increasing by 1.9% yoy (up from a 15-month low of 1.3% in August). Producer prices rose in September – having recorded fifty-four months of falls – up by 0.1% yoy.”