China’s industrial production and retail sales exceeded market expectations in September, signaling improving economic momentum in the world’s second-largest economy. However, weak investment activity and continued pressure on the property sector highlighted persistent challenges, according to data released Monday by the National Bureau of Statistics (NBS).
China’s Industrial Production and Retail Sales Beat Expectations
Industrial production increased by 5.5% year-on-year in September, surpassing economists’ forecasts of 5.4%. The reading also marked an acceleration from August’s 5.2% growth.
Meanwhile, retail sales of consumer goods rose 1.1% annually, more than double the anticipated 0.5% increase. This represented a notable improvement from the previous month’s 0.4% expansion.
The Chinese yuan strengthened modestly against the U.S. dollar following the economic data. The USD/CNY currency pair declined 0.1%, while USD/CNH slipped 0.04%.
Despite the stronger economic figures, Chinese equities traded lower. The Shanghai Shenzhen CSI 300 index fell 0.2%, while the Shanghai Composite dropped 0.3%.
Manufacturing Activity Returns to Expansion
China’s manufacturing sector showed further signs of recovery as industrial activity gained momentum.
The official NBS manufacturing Purchasing Managers’ Index (PMI) climbed to 50.1 in September from 49.8 in August. Consequently, the indicator moved above the critical 50-point threshold, signaling a return to expansion after the previous month’s contraction.
Additionally, stronger manufacturing activity coincided with an improvement in broader economic growth.
China’s gross domestic product (GDP) expanded 4.5% year-on-year during the third quarter, exceeding forecasts of 4.4% and accelerating from the previous quarter’s 4.3% growth.
On a seasonally adjusted quarterly basis, GDP increased 1.2%, compared with 0.9% in the preceding quarter. This performance also surpassed economists’ expectations.
Consumer Spending Improves but Demand Remains Subdued
Although September’s retail sales exceeded expectations, the broader consumption picture remained relatively weak.
During the first nine months of the year, retail sales of consumer goods increased just 1.1% compared with the corresponding period a year earlier.
Meanwhile, combined sales of goods and services rose 2.6%. Services continued to outperform, recording 5.0% growth, while goods sales advanced only 1.0%.
These figures suggest that consumer demand is gradually stabilizing, although the recovery remains uneven across different segments of the economy.
Property Market Weakness Continues to Weigh on Investment
Investment remained a significant weakness despite the improvement in industrial activity and consumer spending.
China’s fixed-asset investment contracted 7.2% year-on-year during the January-September period. This matched the decline recorded during the first eight months of the year but was slightly better than economists’ expectations for a 7.3% drop.
The real estate sector continued to face substantial difficulties. Property development investment plunged 20.6% over the first nine months, underscoring the persistent impact of the country’s prolonged housing market downturn.
Nevertheless, labor market conditions improved slightly. The nationwide urban surveyed unemployment rate declined to 5.2% in September from 5.3% in August, outperforming expectations for an unchanged reading.
Overall, September’s economic indicators pointed to improving industrial activity and modestly stronger consumer demand. However, continued weakness in property investment suggests that China’s economic recovery remains uneven, with important structural challenges still unresolved.
