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China's retail sales beat forecasts in October, despite property market slump – CNBC

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A staff worker arranges vegetables at a supermarket at Congtai District on November 10, 2021 in Handan, Hebei Province of China.
Li Hao | Visual China Group | Getty Images

BEIJING — China’s retail sales rose more than expected in October, even as fixed asset investment remained sluggish, according to data released Monday by the National Bureau of Statistics.

October retail sales grew by 4.9% from a year ago, beating a Reuters’ poll forecasting 3.5% growth, and faster than the 4.4% rise in September.

The better-than-expected retail sales in October came during a month that kicked off with China’s last big public holiday for the calendar year. However, significant drivers of retail sales such as autos and apparel declined in October from a year ago.

Industrial production also beat expectations, up by 3.5% year-on-year in October. Reuters had predicted 3% growth.

From January to October, fixed asset investment rose by 6.1% from a year ago, slightly less than the 6.2% rise projected in a Reuters’ poll.

On a monthly basis, fixed asset investment was dragged down by a 5.4% year-on-year decline in real estate investment last month, according to estimates from Tommy Wu, lead economist at Oxford Economics.

“Economic momentum remained weak in October, with the real estate downturn weighing on industry and a new wave of Covid outbreaks dampening household consumption,” Wu said. He expects the downturn in property to be contained, but still drag down growth in industrial production.

“While electricity shortages and production cuts hampered output in early October, we don’t think they are a significant problem anymore, following a range of policy measures to boost coal production and lower coal prices,” Wu said.

Property sector

In the last two years, Chinese regulators have sought to reduce the real estate industry’s reliance on debt for growth.

Major real estate developers like Evergrande have teetered on the brink of default, raising concerns among global investors about potential fallout in the world’s second-largest economy. Property accounts for about a quarter of China’s GDP.

Prices for new homes in more than 50 of 70 major Chinese cities declined in October from the prior month, the statistics bureau said Monday.

Despite the recent slump in real estate, which accounts for the bulk of household wealth, the spokesman for the National Bureau of Statistics, Fu Linghui, claimed Monday that the property market remained stable overall and noted increases in floor space sold.

Inflationary pressure in China

China’s economy has faced several other challenges this year — from slower-than-expected consumer spending to floods and power shortages threatening to disrupt global supply chains.

A surge in commodity prices has raised concerns of stagflation — an economic phenomenon in which prices rise but business activity stagnates, which leads to high unemployment and reduced consumer spending power.

While “it seems like there are some signs of stagflation,” the situation is caused by short-term factors, Fu said in Mandarin, according to a CNBC translation.

China’s urban unemployment rate held steady in October from the prior month, at 4.9%. The jobless rate for those between the ages of 16 and 24 remained much higher at 14.2%, though slightly lower than 14.6% in September.

China’s consumer price index (CPI) rose by 1.5% in October from a year ago, while the producer price index (PPI) rose by 13.5%, its fastest since 1995.

Even if rising producer prices cause consumer prices to increase, “we do not think CPI inflation will rise enough to become a serious problem for monetary policy,” Wu said. He expects the producer price index to fall significantly next year, partly on easing constraints on commodity supply.

Looking ahead, uncertainties remain on the horizon. China’s pursuit of a “zero tolerance” policy on controlling the coronavirus pandemic has restricted travel within the country. Also weighing on business activity sentiment is Beijing’s wide-ranging regulatory crackdown targeting sectors including internet companies with alleged monopolistic behavior.

Strong export growth has remained a bright spot for the Chinese economy. National GDP is still on pace to exceed the IMF’s global growth prediction of 5.9%, according to major banks polled by CNBC.

— CNBC’s Yen Nee Lee contributed to this report.

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Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.

Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.

Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).

SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.

The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.

WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.

SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.

SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.

SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.

The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.

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The Canadian Press. All rights reserved.

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Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

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Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.

“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.

“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”

Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.

On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.

If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.

These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.

If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.

However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.

He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.

“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.

Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.

The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.

Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.

Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.

Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.

Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.

Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”

In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.

“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:SHOP)

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RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

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TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.

The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.

The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.

RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.

The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.

RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:REI.UN)

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