(Bloomberg) — China’s economic growth last quarter probably undershot Beijing’s annual target for 2023 as the property sector and subdued demand weighed on activity, a sign of the recovery’s fragility as the government reportedly mulls more stimulus.
Data due Wednesday will likely show gross domestic product expanded 4.5% in the July-to-September period from a year earlier — below the official full-year target of about 5%. GDP growth from the prior quarter likely picked up slightly. Authorities will also release data on industrial output, retail sales, investment and unemployment.
A growth rate slowing below the government’s annual goal may create a case for policymakers to step up support for the economy. While stimulus so far has appeared to have some impact — factory activity improved and a drop in exports moderated — consumer prices in September slowed to the brink of deflation and loan growth was weak.
Some economists have been raising their forecasts in recent weeks as they anticipate China just about hitting its growth target for 2023 — though it’s not a sure bet and any weakness in the data may suggest a need for President Xi Jinping’s government to do more to support the recovery.
Authorities are considering raising this year’s budget deficit by issuing more debt to spend on infrastructure, Bloomberg News reported last week, and are also mulling ways to shore up stock market confidence. Economists are expecting China to further cut interest rates and banks’ reserve requirement ratio this year.
“We believe it’s still too early to call the bottom,” said Nomura Holdings Inc. economists led by Lu Ting in a Tuesday note. “We expect a triple dip towards year-end or early 2024, and Beijing may have to step up its efforts to stabilize growth again at that time.”
If the third-quarter GDP data shows growth of 4.5%, Lu projects the final three months of the year would have to match that pace for Beijing to hit its target.
The National Bureau of Statistics is expected to release September and third-quarter economic data Wednesday at 10 a.m. local time. Here’s what to watch:
Industrial Production
Industrial output is projected to have increased 4.4% year-on-year in September, according to economists polled by Bloomberg. That’s a bit lower than August’s 4.5% pickup.
Even so, sequential growth has shown signs of improvement. Factory activity returned to expansion in September, according to an official survey, while a decline in exports narrowed further. High-frequency data also pointed to faster production of key construction materials, such as cement. Coal prices surged.
Power consumption in China jumped 9.9% last month from a year ago, the National Energy Administration said in a statement Monday, providing more evidence that economic activity has gained traction. However, the comparison base was relatively low, given that some southwestern provinces imposed power usage curbs amid a drought in September 2022.
Retail Sales
Retail sales probably continued to rebound. Economists predict sales growth accelerated to 4.9% in September from a year earlier, higher than August’s 4.6% gain.
Data reflecting consumer confidence and spending has been mixed in the past few weeks. Policies to boost car purchases seem to have worked somewhat, with passenger vehicle sales rising 5% last month from a year ago — the most since May.
Household spending on services including travel, hotels and catering were lifted over the Golden Week holiday period that started in late September, though those figures weren’t as strong as the government had hoped. Not all of that data will feature in this week’s figures, since most of the holiday occurred in October.
Consumer prices surprisingly stalled in September, underscoring challenges to the economy. UBS Group AG economists including Wang Tao, meanwhile, wrote last week that household views on existing and expected income growth suggested a “continued but halfway” recovery for those metrics. They cited an August UBS survey of 2,500 Chinese consumers.
Households in urban areas also accumulated more excess savings through the first half of the year in what the UBS economists called a “lingering headwind” for the consumption recovery.
Fixed-Asset Investment
Fixed-asset investment is projected to have risen 3.2% in the first nine months of the year from the same period in 2022. That would be flat with the growth rate from January through August.
Government-led spending on infrastructure increased after Beijing urged provinces to accelerate the issuance of special local bonds. Improving industrial profits and China’s push to make breakthroughs in advanced technology such as semiconductors amid curbs slapped by the US also bode well for manufacturing investment.
Property Woes
China’s debt-laden property sector remains the single biggest threat to the economy’s recovery. Developers are still reeling from a widening credit crisis, with Country Garden Holdings Co. becoming the latest major builder to signal a maiden default.
Economists expect real estate investment to have fallen 8.9% in the January-to-September period from a year ago, worsening from the pace recorded through the first eight months. That drop would suggest that measures policymakers have rolled out in recent weeks to help the sector — including reducing downpayment requirements and mortgage rates — have had limited impact.
“We continue to assume an ‘L-shaped’ recovery path for the property sector in coming years,” Goldman Sachs Group Inc. economists including Lisheng Wang wrote in a research note earlier this month. They cited “persistent weakness” and “record-high housing inventory” in lower tier cities, along with still-tight financing conditions for private developers.
The Goldman economists expect more easing to housing rules in the coming months, including a loosening of home purchasing curbs in more big cities, more public housing construction and additional financial support to ensure the delivery of pre-sold new homes.
Government Support
All eyes will be on whether the Chinese government adds more stimulus in the coming weeks to support the recovery.
The People’s Bank of China left the rate on its one-year policy loans unchanged on Monday, though it injected the most amount of cash through its medium-term lending facility since December 2020. The central bank last cut the interest rate on those loans in August, and freed up more long-term liquidity in September by lowering the amount of cash banks must hold in reserve.
What Bloomberg Economics Says …
“China’s recovery is starting to get some traction, supported by stronger public investment and monetary easing. This should be clear in September activity and third-quarter GDP data – beneath the headline readings. This would set the economy up for a better performance in the second half of the year, especially with additional stimulus in the works – putting the 5% growth target for 2023 within reach.”
— Chang Shu and David Qu, economists
Read the full report here.
“We still have ample room and policy reserve to deal with unexpected challenges and changes,” said Zou Lan, head of monetary policy at the PBOC, during a briefing on Friday. “We will continue with counter cyclical adjustment to create an appropriate monetary and financial environment to stimulate the organic growth momentum of the economy.”
Central bank Governor Pan Gongsheng last week offered a sanguine view of the economy, saying that the property market has shown signs of improvement and that local government debt risks are “manageable.”
Speaking during the International Monetary Fund’s annual meetings in Marrakech, Morocco, Pan cited data on industrial output and services activity that he said showed positive economic trends.
–With assistance from Ocean Hou and James Mayger.
(Updates with economist’s comment, September power consumption.)
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
