Customers dine at a restaurant in Beijing, on Oct. 17.TINGSHU WANG/Reuters
China’s economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside, suggesting the recent flurry of policy measures is helping to bolster a tentative recovery.
Rapidly weakening growth in the world’s second-biggest economy since the second quarter prompted authorities to step up their support steps, with Wednesday’s batch of data indicating the stimulus is starting to gain traction although a property crisis and other headwinds continue to pose risks to the outlook.
Gross domestic product (GDP) grew 4.9 per cent in July-September from the year earlier, data released by the National Bureau of Statistics showed, versus analysts’ expectations in a Reuters poll for a 4.4-per-cent increase but slower than the 6.3-per-cent expansion in the second quarter.
On a quarter-by-quarter basis, GDP grew 1.3 per cent in the third quarter, accelerating from a revised 0.5 per cent in the second quarter and above the forecast for growth of 1.0 per cent.
“It seems that all of that stimulus is finally beginning to take effect, with a broad beat from growth, retail sales, industrial production and unemployment,” said Matt Simpson, senior market analyst at City Index in Brisbane.
The government is walking a tight rope as it tries to restore economic equilibrium, with policy makers having to navigate a domestic property crisis, high youth unemployment, depressed private sector confidence, a slowdown in global growth and Sino-U.S. tensions over trade, technology and geopolitics.
Beijing has in recent weeks unveiled a raft of measures, but its ability to spur growth has been hamstrung by fears over debt risks and a fragile yuan, which has been hit hard this year owing to widening yield differentials as global interest rates remain elevated, led by the U.S. Federal Reserve’s tightening campaign.
Asian stocks pared their losses after the better-than-expected China data, while the yuan and trade-dependent Australian and New Zealand dollars all bounced. The yuan hit a one-week high of 7.2905 a U.S. dollar.
The recovery momentum suggests the government’s full year 2023 growth target of around 5.0 per cent is likely to be achieved.
“The improvement in Q3 economic data makes it less likely for the government to launch stimulus in Q4, as the growth target of 5 per cent is set to be achieved,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The focus of the government and the market will shift to the growth outlook for next year. The key issue is what growth target the government will set and how much fiscal easing will take place.”
The statistics bureau said China would be able to hit the 2023 growth target if the fourth quarter growth tops 4.4 per cent.
The rosier-than-expected data have prompted international banks to upgrade their 2023 growth outlook, with Nomura raising its forecast to 5.1 per cent versus 4.8 per cent previously and JPMorgan lifting its forecast to 5.2 per cent from 5 per cent.
Moody’s Analytics has also raised its 2023 growth projection to 5 per cent from 4.9 per cent.
Industrial output in September grew a stronger-than-expected 4.5 per cent from a year earlier, but the pace was unchanged from August, according to the separate data. Analysts had expected a 4.3-per-cent increase.
Growth of retail sales, a gauge of consumption, also beat expectations, rising 5.5 per cent last month, and accelerating from a 4.6-per-cent increase in August. Analysts had expected retail sales to expand 4.9 per cent.
Fixed asset investment grew 3.1 per cent in the first nine months of 2023 from the same period a year earlier, versus expectations for a 3.2-per-cent rise. It expanded 3.2 per cent in the January-August period.
But a deepening downturn in the property sector, which accounts for nearly a quarter of economic output, poses a big challenge to policy makers as they seek to keep growth on track, analysts said.
The latest data underlined those worries. Property investment in the first nine months of 2023 fell by 9.1 per cent from a year earlier, after slumping 8.8 per cent in January-August. Fixed-asset investment by private firms fell 0.6 per cent in January-September year-on-year, highlighting weak private sector confidence.
The faltering property sector has hit some of the biggest developers in the country.
A grace period for a US$15-million coupon payment by Country Garden Holdings, China’s biggest private property developer, expired earlier in the day, fuelling fears that it had defaulted on its offshore debt.
“In the grand scheme of things, I don’t think individual developers running into further financial turbulence will be enough to derail things. The problems of the developers have been known to the market for some while now,” said Frederic Neumann, chief Asia economist and co-head of Global Research at HSBC.
All the same, efforts by policy makers to support big cities have failed to bolster confidence, underscoring the depth of the problems in the industry which slumped into a crisis two years ago.
“In the near-term, our expectations are still for a further round of 10bp rate cuts in Q4 from the PBOC, a step-up in the easing of home-buying restrictions, and modest increases in state-directed infrastructure spending,” Louise Loo, China economist at Oxford Economics, said in a note.
The International Monetary Fund on Wednesday downgraded its 2023 and 2024 growth forecasts for the Asian giant, saying the property slowdown could cause China’s GDP to decline.
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.
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