China’s economy grinds lower as October indicators miss forecasts

Employees work on the production line of a television factory under Zhaochi Group in Shenzhen, China, 8 August - Reuters/File Photo

BEIJING (Reuters): China’s industrial output grew significantly slower than expected in October, as weakness in global and domestic demand and the drawn-out Sino-US trade war weighed on activity in the world’s second-largest economy.

Industrial production rose 4.7% year-on-year in October, data from the National Bureau of Statistics released on Thursday showed, below the median forecast of 5.4% growth in a Reuters poll.

Indicators showed other sectors also slowing significantly and missing forecasts with retail sales growth back near a 16-year trough and fixed asset investment growth the weakest on record.

The disappointing economic data adds to the case for Beijing to roll out fresh support for the economy after China’s economic growth slowed to its weakest pace in almost three decades in the third quarter as the bruising US trade war hit factory production.

Broad activity in China’s manufacturing sector remains weak with data on the weekend showing factory gate prices falling at their fastest pace in more than three years in October.

China’s official Purchasing Managers’ Index (PMI) also showed activity in the factory sector remained in contraction for a sixth straight month in the month.

“Admittedly, optimism surrounding a phase-one US-China trade deal could provide a boost to corporate investment in the near term,” Capital Economics China Economist Martin Lynge Rasmussen said.

“But even if a minor deal is agreed upon in the coming months, this would merely allow the focus to shift to the more intractable issues that we think will eventually lead the trade talks to break down. The case for further monetary easing remains intact.”

Other data on Thursday showed China’s property investment growth in the first 10 months of the 2019 slowing year-on-year.

The tariff war between China and the United States has hit global demand, disrupted supply chains and upended financial markets.

While some signs of recent progress in trade negotiations between the superpowers have cheered investors, officials from both sides have so far avoided any firm commitments to end their dispute.

That uncertainty has continued to weigh on manufacturers and their order books.

Thursday’s data also showed fixed asset investment, a key driver of economic growth, grew 5.2% from January-October, against expected growth of 5.4%. The January-October growth was the lowest since Reuters record began in 1996.