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Fast Comment ChinaActivity indicators signal growth slowdown

  1. All three indicators disappointed in August
  2. Infrastructure is dragging down fixed investments
  3. Growth set to slow gradually
All three indicators disappointed in August
Consensus expected industrial production and retail sales to grow in August. Instead, they fell markedly from 6.4 percent y-o-y in July to 6.0 percent respectively, from 10.4 percent to 10.1 percent. In addition, growth of fixed investment disappointed by falling more than expected in year-to-date terms. Our calculations show that the outcome corresponds to a sharp fall in the ordinary annual growth rate from 6.5 percent y-o-y in July to 3.8 percent, the lowest in more than a decade.
Infrastructure is dragging down fixed investments
The main reason behind the slowing growth is that the housing market and construction activity is finally reacting to the many measures taken to dampen house price increases. However, the decline in growth of overall fixed investments in August was driven by a drop in infrastructure investments projects following fairly strong growth thus far in 2017. Property investment growth increased in August, but the trend is likely still downward as indicated by declining house sales growth.
Growth set to slow gradually
We expect overall growth to continue to slow gradually but steadily, as the authorities’ efforts to dampen credit growth and the lively housing market hit overall activity. Following weak activity indicators in July and August, official GDP growth should slow in Q3 compared to Q2’s 6.9 percent y-o-y, when the figure is published on October 19. Whether the authorities dare to publish a weaker growth figure, the day after the opening of the National Congress of the Communist Party on October 18, remains to be seen.



Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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