context: The economy continues to slow in line with market expectations. With a high CPI and slowing GDP growth, fears of stagflation are increasing, but because the high CPI is primarily due to pork price increases based on swine flu, stagflation is not yet a major concern. With the global economy also slowing, policymakers will hold off on stimulus to avoid using it too early, so a massive stimulus is unlikely in 2019.
National Bureau of Statistics (NBS) released Q3 2019 economic data showing that downward pressure on the economy continues. Data shows
- Q3 2019 GDP grew by 6.0 percent, down 0.2 percentage points from Q2
- Q1-Q3 GDP increased by 6.2 percent y-o-y
- January-September 2019 fixed asset investment increased by 5.4 percent y-o-y, down 0.1 percentage point from August
- infrastructure investment increased by 4.5 percent y-o-y, up 0.3 percentage points from August
- manufacturing investment increased by 2.5 percent y-o-y, down 0.1 percentage points from August
- real estate investment increased by 10.5 percent y-o-y, no change from August
- private investment increased by 4.7 percent y-o-y, down 0.2 percentage points from August
- September total consumer goods retail sales increased by 7.8 percent y-o-y, up 0.3 percentage from August
- September national urban surveyed unemployment was 5.2 percent, up 0.3 percentage point y-o-y, but level with August
- September industrial added value increased by 5.8 percent y-o-y, up 1.4 percentage points from August
Weak consumption caused much of the GDP growth rate decline, according to Zhang Yiping 张一平 China Merchants Securities macro analyst. Zhang points out that consumption dropped 0.8 percentage points y-o-y, while investment growth only slowed by 0.5 percentage points y-o-y. Meanwhile value added to industry benefited from seasonal effects and optimism about a trade deal with the US, according to Zhang Deli 张德礼 Lianxun Securities senior macro researcher.
Analysts are divided about what Q4 holds. CITIC Securities predicts a slight increase in GDP in Q4 and monetary policy remaining patient with stimulus measures. The group sees Q1 2020 as a critical period for the economy's future. Lu Ting 陆挺 Nomura Securities China chief economist expects the economy will be stable in October, but that the GDP growth rate for Q4 and 2019 overall will slow to 5.8 percent and 6.1 percent respectively.