Men work with a crane near a shopping mall in Beijing, on Jan. 17.Ng Han Guan/The Associated Press
China’s economy grew 5.2 per cent in 2023, slightly more than the official target, but the recovery was far shakier than many analysts and investors expected, with a deepening property crisis, mounting deflationary risks and tepid demand casting a pall over the outlook for this year.
Expectations that the world’s second-largest economy would stage a strong post-COVID bounce quickly fizzled as the year progressed, with weak consumer and business confidence, mounting local government debts and slowing global growth sharply weighing on jobs, activity and investment.
“The recovery from COVID – disappointing as it was – is over,” according to China Beige Book International’s latest survey released on Wednesday.
“Any true acceleration [this year] will require either a major global upside surprise or more active government policy,” the private data collector said.
A slew of economic readings early on Wednesday suggested it lost more momentum heading into the new year, despite a flurry of government support measures.
Gross domestic product (GDP) grew 5.2 per cent in October-December from a year earlier, data from the National Bureau of Statistics (NBS) data showed, quickening from 4.9 per cent in the third quarter but missing a 5.3 per cent forecast in a Reuters poll.
On a quarter-by-quarter basis, however, GDP grew 1.0 per cent, slowing from a revised 1.5 per cent gain in the previous quarter.
Some December indicators released along with the GDP data were more grim, suggesting the country’s protracted property crisis is deepening despite government efforts to prop up the sector.
Other data for last month showed retail sales growth slowed and investment remained tepid, with only industrial output showing some signs of improvement.
Policy insiders expect Beijing will maintain a similar growth target of around 5 per cent for this year, but analysts say that may be a tall order even with additional stimulus.
Cyclical problems such as the property crisis are colliding with deep-seated structural issues such as an overreliance on debt-fuelled investment and infrastructure, rather than steps to broaden and deepen consumption.
The head of NBS, Kang Yi, said at a news conference in Beijing that China’s 2023 growth was “hard won,” but added the economy faces a complex external environment and insufficient demand in 2024.
Stocks in China, already plumbing five-year lows, tumbled after the latest disappointing data as did Chinese firms listed in Hong Kong, while the yuan eased. The currency has come under fresh pressure recently as market expectations grow that policy makers will have to commit soon to more interest rate cuts and other support measures.
“At present, our country’s government debt level and inflation rate are both low, and the policy tool box is constantly being enriched,” NBS’s Mr. Kang said. “Fiscal, monetary and other policies have relatively large room for manoeuvring, and there are conditions and space for intensifying the implementation of macro policies.”
Analysts said stock market investors appeared most rattled by ominous real estate data on Wednesday.
China’s December new home prices fell at the fastest pace in nearly nine years, marking the sixth straight month of declines, NBS data showed. Property sales by floor area fell 8.5 per cent for the year while new construction starts plunged 20.4 per cent.
Debt-ridden developers have delayed construction on millions of homes according to economists’ estimates, further weighing on consumer confidence.
“I think markets were disappointed they didn’t cut interest rates on Monday, but it seems they are thinking about more targeted measures,” said Woei Chen Ho, economist at UOB.
“The property issues are not fixed by broad-based rate cuts.”
On Monday, the central bank left the medium-term policy rate unchanged, defying market expectations for a cut as pressure on the yuan continued to limit the scope of monetary easing.
“The piecemeal rollout of support from mid-year has done little to turn things around. It’s clear that China’s economy needs extra stimulus,” said Harry Murphy Cruise, economist at Moody’s Analytics.
“Direct support for households could be the crowbar needed to pry open wallets, but the prospect of such support has been a non-starter for officials in recent years. Instead, monetary easing and new debt issuance for infrastructure, energy and manufacturing projects look more likely.”
As businesses remained wary of adding workers in the face of many uncertainties, the nationwide survey-based jobless rate increased to 5.1 per cent in December from November’s 5.0 per cent, NBS data showed.
NBS also resumed the publication of youth unemployment data, which it had suspended for five months. The December survey-based jobless rate for 16-24 years olds, excluding college students, was at 14.9 per cent, compared with a record high of 21.3 per cent in June.
Recent data had suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pickup in exports unlikely to kindle a quick turnaround in lacklustre factory activity. December bank lending was also weak.
“While we still anticipate some near-term boost from policy easing, this is unlikely to prevent a renewed slowdown later this year,” said Julian Evans-Pritchard, head of China Economics at Capital Economics.
“Although the government met its 2023 GDP growth target of ‘around 5.0 per cent,’ achieving the same pace of expansion in 2024 will prove a lot more challenging.”
Adding to concerns over China’s longer-term growth prospects, the country’s population fell for a second consecutive year in 2023. The total number of people in China dropped by 2.08 million to 1.409 billion in 2023, a faster decline than in 2022.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
