If China’s economic performance in September and the September quarter were a school report card, it would have earned a bare pass mark of 50%, with the comment “Should be doing better.”
Every measure of activity across the month and the quarter was weak to poor as the country continues to grapple with weak demand and climate problems, especially drought, heavy rains, and floods.
Output is lackluster, retail sales are sluggish, deflation looms over consumers, and financial services are struggling. Investment and demand in export markets, except for electric vehicles, are weak, and the economy as a whole is meandering, despite the harsh Covid restrictions ending almost a year ago.
China’s gross domestic product (GDP) grew by 4.9% year on year in the third quarter. While the Financial Times noted that the outcome exceeded market expectations, it fell far short of the 6.3% growth rate in the June quarter.
Market forecasts projected a 4.6% annual growth rate, and the reported rate for the latest quarter was just below the 5% official estimate.
The economy expanded by 1.3% on a quarterly basis, according to China’s National Bureau of Statistics, showing some improvement from the mere 0.5% growth in the April-June period. However, the 0.5% figure was a significant downward revision from the originally reported 0.8% quarterly rate three months ago, indicating a stumble in the middle months of this year.
China also released monthly data on Wednesday, reporting a 4.5% growth in industrial production and a 5.5% spike in retail sales in September compared to the previous year—both figures surpassed market expectations, although production remained unchanged from August, while retail sales increased.
Unemployment eased to 5% in September, down from 5.2% the previous month. Unfortunately, data on unemployment among young people was not released.
With inflation teetering on the edge of deflation and producer prices continuing to contract, domestic demand remains weak, with both exports and imports falling by 6.2% compared to the previous year last month. Although this was an improvement over previous months and stronger than expected for exports, imports showed slight weakness.
It’s worth noting that at the start of the month, activity surveys for major sectors of the economy yielded contradictory results: expansion for major companies in manufacturing and services but contraction for smaller and medium-sized businesses.