China's Q3 GDP arrives at weakest pace since early 2023, slowdown needs more momentum By Reuters
Written by Kevin Yao
BEIJING (Reuters) – China's economy grew at its slowest pace since the start of 2023 in the third quarter, and although last month's consumption and industrial figures forecast a slump in the construction sector it remains a major challenge for Beijing as it tries to boost growth.
The world's second-largest economy grew 4.6% in July-September, official data showed, a touch above the 4.5% forecast in a Reuters poll but below the 4.7% pace in the second quarter.
Policymakers may find reason for optimism in higher forecasts of industrial output and retail sales data for September, but the construction sector continued to show sharp weakness and supported market calls for additional support measures.
“China's data for Q3 2024 is not a book opener,” said Bruce Pang, Chief Economist at JLL. “Performance is in line with market expectations, given weak domestic demand, a struggling housing market, and slowing export growth.”
“The stimulus package announced at the end of September will take time and patience to boost growth in the next few quarters,” he added.
The latest figures come as authorities have begun to ramp up stimulus measures in a bid to ensure the economy meets the government's 2024 growth targets of around 5%.
A Reuters poll showed China's economy is likely to grow 4.8% in 2024, undershooting Beijing's target, and growth could slow to 4.5% in 2025.
The economy is reeling from uneven growth this year, as industrial production outpaces domestic consumption, exacerbating inflationary risks amid structural collapse and rising local government debt.
Policymakers, who have been relying on infrastructure and manufacturing investment to fuel growth, have promised to shift focus to encouraging consumption, but markets are still waiting for more details on the planned fiscal stimulus package.
Quarterly, the economy grew by 0.9% in the third quarter, compared with growth of 0.7% in April-June, and below the 1.0% forecast.
“Although (the Q3 figure) decreases slightly from the second quarter, it makes the official goal of 5% growth difficult to achieve if this trend continues until the end of the year,” said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management.
“We are waiting for more clarity on the incentives for spending,” he added.
Recent data have raised the risk that China will enter a concentrated phase of inflationary pressure as export prospects, the only bright spot in the economy this year, appear to be fading amid foreign trade restrictions.
China's export growth slowed sharply in September while imports also fell, below forecasts for large margins and suggesting that manufacturers cut prices to move inventories ahead of tariffs from several trading partners.
Worryingly, consumer inflation eased unexpectedly in September, while producer price deflation widened, increasing pressure on Beijing to take steps to stimulate demand as exports run out of steam.
Last week, China's finance minister promised to “significantly increase” credit to revive growth, but left investors guessing about the full size of the stimulus package.
China may raise 6 billion yuan ($842.60 billion) in special treasury bonds over three years to help shore up the faltering economy through increased fiscal stimulus, Caixin Global reported, citing multiple sources with knowledge of the matter.
Reuters reported last month that China plans to issue 2 billion yuan worth of special bonds this year as part of its fiscal stimulus.
The central bank in late September announced the most aggressive monetary support measures since the outbreak of the COVID-19 pandemic, including interest rate cuts, an injection of 1 trillion yuan in liquidity and other measures to support real estate and stock markets.
Analysts polled by Reuters expect a 20 basis point reduction in China's one-year lending rate, the benchmark lending rate, and a 25 basis point reduction in the amount of bank loans in the fourth quarter.
($1 = 7.1208 lots)
