Industrial Output and Economic Outlook in China

By Kevin Yao and Ethan Wang

BEIJING (Reuters) – China's factory output growth slowed in October, and demand woes in the property sector showed few signs of abating, despite a slight improvement in consumer activity. This has led to calls for more economic stimulus.

Recent data puts pressure on Chinese policymakers as they face the possibility of Donald Trump's return to the White House, with his promises of heightened tariffs on Chinese imports and a cabinet of China hawks.

October's industrial output grew by 5.3% year-on-year, down from 5.4% in September and below the expected 5.6% according to a Reuters poll. Meanwhile, retail sales rose 4.8% in October, a significant acceleration from 3.2% in September, showing the quickest growth since February, bolstered by a week-long holiday and the Singles' Day shopping festival, which began earlier this year.

Sales across major e-commerce platforms surged 26.6% to 1.44 trillion yuan during Singles' Day, indicating a positive impact from the trade-in program initiated earlier.

Fixed asset investment showed a 3.4% rise in the first ten months of 2024, consistent with estimates, while property investment dropped 10.3% year-on-year, extending from a 10.1% decline over the first nine months.

However, property sales by floor area fell 15.8% in January-October, slowing from a 17.1% drop in earlier months, suggesting some recovery due to recent policy adjustments.

In September, China’s central bank unveiled its largest stimulus since the pandemic. Furthermore, a 10 trillion yuan ($1.4 trillion) package was approved to alleviate local government debt burdens without directly invigorating the economy. Recent tax incentives for home and land transactions aim to support the beleaguered property market, though analysts predict only modest effects on economic activity and prices in the short term.

China’s consumer prices increased at the slowest pace in four months in October amid deepening producer price deflation, despite the new policies. The government has set a GDP growth target of around 5% for the year, although a recent Reuters poll projected a slight undershoot at 4.5% in 2025.

Trump's recent election has triggered concerns in China about potential tariffs surpassing 60% on Chinese goods, which could introduce prolonged economic uncertainty and further delay recovery efforts.