Chinese factory activity and consumer spending were surprisingly robust in October, official monthly figures showed Monday, though fresh signs of weakness in the property sector underscored concerns for the outlook of the world’s second-largest economy.
Industrial production rose 3.5% from a year earlier in October, China’s National Bureau of Statistics said, accelerating from September’s 3.1% pace and beating the 2.8% median forecast by economists polled by The Wall Street Journal.
Retail sales, a key gauge of Chinese consumption, unexpectedly increased 4.9% in October from a year earlier, higher than September’s 4.4% growth rate and outstripping the 3.5% expected by surveyed economists.
In both cases, the robust factory and consumption numbers highlighted how China’s economy was able to buck two headwinds—widespread power shortages and a fresh wave of coronavirus infections—that had dragged heavily in previous months.
Analysts had similarly expected domestic consumption to take a hit last month, with a wave of Covid-19 cases across many of China’s provinces and cities. That hurt long-distance travel and services reliant on close human contact. Sales in the restaurant sector, which is particularly sensitive to Covid-19 outbreaks, grew 2% in October compared with a year earlier, down from September’s 3.1% year-over-year gain, official data showed.
Instead, the surprisingly strong retail-sales number reflected a boost in online sales, Fu Linghui, a spokesman for the statistics bureau, said in a briefing Monday, pointing to presales by China e-commerce platforms ahead of the Singles Day shopping festival, which takes place on Nov. 11 each year.
Consumer spending also likely benefited from signs of stability in the labor market. China’s urban jobless rate, its headline unemployment figure, remained unchanged at 4.9% in October. The National Bureau of Statistics said Monday that the country has created more than 11 million jobs in the first 10 months of the year, which likely helped underpin China’s consumption.
That good news, however, was offset in part by new statistics pointing to an accelerating slowdown in China’s property market, a recent focus of attention among economists and investors.
New-home prices dropped 0.25% in October from September, the biggest month-over-month decline since February 2015, according to calculations by The Wall Street Journal based on official data released Monday.
New-construction starts by property developers dropped 7.7% in the January-to-October period from a year earlier, widening from a 4.5% on-year decline in the first nine months of the year, according to the statistics bureau.
To rein in excessive borrowing, policymakers last year introduced the “three red lines,” a set of limits on the debt that property companies can accumulate. That constrained developers’ cash flow and pushed some companies, most notably China Evergrande Group, to the brink of default.
As a result, real-estate investment in the January-to-October period increased 7.2% from a year earlier, decelerating from an 8.8% increase in the first three quarters of the year. Home sales by volume also slowed to 12.7% growth in the first 10 months, down from the 17.8% rate for the first three quarters of 2021.
The deceleration in property investment dragged on overall fixed-asset investment in China, which slowed to a 6.1% rise in the January-to-October period from a year earlier, compared with a 7.3% increase for the first three quarters of the year and the 6.2% pace expected by the economists.
Beijing hasn’t announced any policy-easing measures to alleviate the real-estate slump. But the rising risks have prompted policy makers to discuss loosening the rules in such a way as to allow struggling developers to sell off assets and avoid default, the Journal reported last week.