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China economy stabilizes as spending, power supply picks up – BNN

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China’s economy performed better than expected in October as retail sales climbed and energy shortages eased, though a slump in property and rising COVID outbreaks show the recovery isn’t on solid ground yet.

Industrial output rose 3.5 per cent in October from a year earlier, while retail sales growth accelerated to 4.9 per cent, beating economists’ forecasts. Growth in fixed-asset investment eased to 6.1 per cent in the first 10 months of the year, with tighter curbs on the real estate market continuing to weigh on the sector. The surveyed jobless rate was steady at 4.9 per cent.

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The better-than-expected numbers provides some relief after the economy’s momentum weakened in recent months on the back of energy shortages, Beijing’s reining in of the property market and widespread COVID-19 outbreaks. However, the recovery remains uncertain, given the outsized contribution of real estate — at 25 per cent of GDP when related industries are included — and the disruption to travel and spending from the government’s stringent virus restrictions.

“Overall there is some improvement, especially in the mining and utility industries,” said Lu Ting, chief China economist for Nomura Holdings Inc. “But other areas actually didn’t improve substantially and remain at low levels, especially for investments.” 

Lu said rising prices and consumers panic-buying goods at the beginning of October may have contributed to the pickup in retail spending last month. When adjusting for inflation, retail sales rose 1.9 per cent in October from a year ago, a slower pace than in September.

Electricity shortages, which had been a key constraint on industrial output in September, eased last month, with power supply climbing 11.1 per cent in October from a year earlier. 

The property slump continued to weigh on output, with production of construction-related commodities, such as steel and iron, contracting. Investment in new construction declined for a fourth month, dropping 7.7 per cent from a year ago.

Separate data from the NBS showed home prices fell 0.25 per cent in October from the previous month, a bigger decline than in September. The benchmark stock index was about 0.3 per cent lower, with property developers declining more after the news on falling home prices. 

What Bloomberg Economics Says…

China’s stronger-than-expected October activity offers some assurance the economy is not sliding deeper into a rut, though there’s no sign it’s set for a turnaround. An extra working day in the month was one reason for the better picture. Even accounting for that, output appeared to stabilize.

Chang Shu, chief Asia economist

The NBS said in a statement the economy “was generally stable and maintained the trend of recovery.” It warned that the “international environment is still complicated and severe with many unstable and uncertain factors.”

Iris Pang, chief economist for Greater China at ING Groep NV, said rising COVID cases will continue to weigh on the economy’s outlook. 

“The potential for sudden strict domestic travel restrictions means that people are still very hesitant about travel,” she said. “This could continue into the coming Chinese New Year holiday in February 2022.”

The slowdown has put the spotlight back on policy makers, who have so far taken a muted approach to stimulus, preferring to “fine-tune” policies rather than flood the economy with support. In line with that approach, the People’s Bank of China refrained from injecting additional cash into the financial system in its monthly liquidity operation on Monday, rolling over all the loans maturing instead.

Most economists expect Beijing to stick with the property curbs, resulting in weaker growth into next year. GDP growth is expected to slow to 3.5 per cent in the final quarter, reach 8 per cent for the full year and weaken to 5.4 per cent in 2022, according to a Bloomberg survey of economists.

“Growth will likely weaken in the rest of this year,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. “The slowdown in the property sector continued, which is the key risk for the macro outlook in the next few quarters.”

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Australia's economy likely contracted in Q3 but recovery expected soon – Financial Post

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BENGALURU — Australia’s economy likely contracted in the third quarter as fresh lockdowns weighed on consumer spending and investments, but the extent of the fall was milder than the historic recession recorded last year, a Reuters poll showed.

Despite Australia’s success last year in containing the COVID-19 virus, fresh flare ups and the stay-at-home rule imposed this year severely dented economic activity leading to job cuts and calls for a ramped-up vaccination drive.

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The Nov. 23-26 poll of 24 economists showed the A$2.07 trillion ($1.5 trillion) economy contracted 2.7% during the July-September quarter. Forecasts ranged from -3.8% to -1.9%.

If economists predictions were realized, it would mark a sharp turnaround in economic activity from the 1.8% and 0.7% expansion rates in the January-March and April-June quarters respectively.

“Extended stay-at-home orders in New South Wales and Victoria will have hit consumption, with services spending set to be particularly impacted,” said Felicity Emmett, senior economist at ANZ.

The year-over-year growth was estimated at 3.0% but that was over a decline of 3.6% in the third quarter last year, revealing no substantial growth.

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Data released by the Australian Bureau of Statistics on Thursday showed capital expenditure https://www.reuters.com/markets/rates-bonds/australia-q3-business-investment-slips-outlook-surprisingly-resilient-2021-11-25 fell a real 2.2% in the third quarter but an upgrade to future spending showed analysts were expecting a rapid recovery to take hold.

Construction activity too declined last quarter but at a much smaller rate than expected, showing a recovery was not far off.

“The fact investment held up pretty well, we expect GDP to surpass its pre-delta level this quarter. Consumption will probably rebound very sharply given lockdowns have now ended,” said Marcel Thieliant, senior Australia & New Zealand economist at Capital Economics.

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Despite the setback to economic growth last quarter, economists do not see that trend turning into a full blown recession.

With about 86% of Australia’s adult population now vaccinated and most restrictions eased, a swift recovery is anticipated on higher consumer spending.

“There is a saying that while history doesn’t repeat, it does rhyme. The pattern for GDP in the second half of 2021 is certainly rhyming with the middle quarters of 2020 – a sharp decline followed by a large bounce,” wrote economists at ANZ. ($1 = 1.3986 Australian dollars)

(Reporting by Shaloo Shrivastava; Polling by Md. Manzer Hussian and Devayani Satyan; Editing by Marguerita Choy)

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China's Economy Likely Remained Weak as Factories Slump – Financial Post

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(Bloomberg) — China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

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The non-manufacturing gauge, which measures activity in the construction and services sectors, is forecast to fall to 51.5 from 52.4 in the previous month. 

China’s energy shortages, which ravaged factory production in September and October, likely eased this month as coal producers boosted output and inventories rose. However, the housing market crisis shows no signs of ending, and frequent Covid-19 outbreaks continue to curb consumption.

“Supply-side restrictions have improved marginally, so production likely rebounded somewhat,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd. But there’s “not much positive signal on domestic demand,” which continued to weigh on activities, he said.

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Economic growth is forecast to slow to 5.3% next year, according to a Bloomberg survey median, with some economists seeing expansion as low as 4%. Bloomberg Economics forecast growth will come in at 5.7%, as the government will likely target a 5-6% range.

What Bloomberg Economics Says…

“In 2021, policy played a secondary role in setting the growth trajectory. In 2022, it will be pivotal. The extent of the slowdown will hinge largely on what balance China strikes between supporting short-term growth and advancing long-term reforms.

…We see the People’s Bank of China cutting the interest rate on its one-year medium-term lending facility by 20 basis points and the reserve requirement ratio by 100-150 bps by end-2022.”

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— Chang Shu and David Qu

For the rull report, click here

Authorities are trying to moderate the sharp downturn in the property market, while providing targeted support to areas such as small businesses and green technology. Officials will reveal more clues on how much policy easing they plan to provide during two key political meetings in December by the Politburo and the Central Economic Work Conference.

China will adopt a more proactive macroeconomic policy next year to respond to the challenges from an uneven recovery of the global economy and instability in containing the pandemic, the Securities Times, run by the People’s Daily, said in a front-page commentary Monday. 

Authorities have exercised restraint in using monetary and fiscal tools amid an economic slowdown this year, thus creating sufficient space for policy maneuvering next year, according to the commentary.

The slowdown is being cushioned by strong export demand, which likely remained solid in November, judging by latest shipment figures from South Korea.

Consumption and travel continues to be affected by a resurgence in virus cases and the country’s growing determination to stick to its strict Covid Zero strategy. Subway passenger traffic in six major cities of China declined less than 10% in November from October, though the plunge is smaller than that over the August outbreak, according to Xing. 

©2021 Bloomberg L.P.

Bloomberg.com

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China's Economy Likely Remained Weak as Factories Slump – Bloomberg

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China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

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