China's GDP growth in Q3 slows to 6%

Urban fixed assets investment declined to 5.4% YTD in September.

China’s economy for July-September 2019 deteriorated further than analysts had expected to 6% YoY from 6.2% YoY in April-June, according to UOB’s Global Economics and Market Research report.

Urban fixed assets investment (FAI) continued to languish and was the lowest it’s been in a year, as growth moderated to 5.4% YTD in September from 5.5% in August. “Despite weaker sentiment, companies are not able to shift completely out of China due to its complete supply chain and large domestic market,” commented UOB economist Ho Woei Chen.

Manufacturing growth rebounded to 5.8% YoY in September from its 17-year low of 4.4% in August. However, this recovery was not enough to offset trade and investment weakness that dragged on the economy.

Disinflatory measures will likely last until the near term due to the US additional tariffs of Chinese goods worth CNY784.5b (US$111b) in September.

Investments made a marginal growth at 1.9% YoY, whilst capacity utilisation steadied at 76.4%.

Retail sales also rose to 7.8% YoY for September, alluding to a smaller contraction in car sales by 2.2% compared to 8.1% in August. Sharp growth was seen in communications equipment due to strong smartphone sales.

Urban disposable income is stable at 8.8% whilst per capita service consumption grew 10.2%. “The near-term effects of the trade war on the employment market and household income is seen as manageable given the flexibility in migrant workers and labor-intensive service sector,” Ho said.

Nevertheless, UOB sees no signs of broad stable growth for China as the current state of trade talks do not translate to a meaningful improvement in business confidence.

Photo courtesy of HSBC.