China’s Q3 GDP set to show broadening recovery as consumers resurface

The world’s second-largest economy likely grew 5.2 per cent in July-September from a year earlier. — Reuters pic
The world’s second-largest economy likely grew 5.2 per cent in July-September from a year earlier. — Reuters pic

BEIJING, Oct 19 — China’s economic recovery stepped up in the third quarter, data released is expected to show today, as consumers returned to malls and major trading partners reopened for business, shaking off the record slump seen earlier this year.

The world’s second-largest economy likely grew 5.2 per cent in July-September from a year earlier, faster than the second quarter’s 3.2 per cent, according to a Reuters poll.

China releases third-quarter GDP data today at 0200 GMT, along with September factory output, retail sales and fixed-asset investment.

Policymakers globally are pinning their hopes on a robust recovery in China to help restart demand as economies struggle with heavy lockdowns and a second wave of coronavirus infections.

“China has become the first major economy to return to its pre-virus growth path, thanks to its rapid containment of Covid-19 and effective stimulus response,” said analysts from Capital Economics. However, they warned a renewed slowdown is likely from late 2021 as stimulus fades.

China’s retail spending has lagged the comeback in factory activity as heavy job losses and persistent worries about infection kept consumers at home, even as restrictions lifted.

However, that is expected to have changed in the third quarter.

In September, auto sales marked a sixth straight month of gains with a solid 12.8 per cent growth and Ford Motor Co’s China vehicle sales jumped 25 per cent in the third quarter from a year earlier.

Domestic passenger flights in September, meanwhile, beat their Covid-19 levels, indicating that sector was approaching a full recovery.

The Covid-19 pandemic, which caused China’s first contraction since at least 1992 in the first quarter, is now largely under control, although there has been a small resurgence of cases in the eastern province of Shandong.

Year-on-year forecasts by 51 analysts polled by Reuters ranged from 2.5 per cent to 7.2 per cent.

On a quarterly basis, GDP is expected to have grown 3.2 per cent in July-September compared with a rise of 11.5 per cent in the previous quarter.

The government has rolled out a raft of measures, including more fiscal spending, tax relief and cuts in lending rates and banks’ reserve requirements to revive the virus-hit economy and support employment.

Analysts polled by Reuters expect industrial output to grow 5.8 per cent in September from a year earlier, quickening from a 5.6 per cent rise in August, while retail sales were seen rising 1.8 per cent, versus a 0.5 per cent rise in August.

Policy support

While the central bank stepped up policy support earlier this year after widespread travel restrictions choked economic activity, it has more recently held off on further easing.

“Because of the ongoing growth recovery but still strong headwinds, we expect Beijing to maintain its ‘wait-and-see’ policy approach through the remainder of this year,” said analysts at Nomura in a note this week.

The International Monetary Fund has forecast an expansion of 1.9 per cent for China for the full year, the only major economy expected to report growth in 2020. — Reuters

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