Chinese chill: property, industrial data cooler for October

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Air appears to be escaping the property bubble. Photo: Reuters

Real estate investment and industrial output in China cooled in October, reinforcing expectations of a gradual slowdown in the country’s economy as the government cracks down on debt risks and pollution. Fixed asset investment and retail sales grew slower than expected.

Property investment grew 5.6% in October from a year earlier, cooling from expansion of 9.2% in September, according to Reuters calculations based on data from the National Bureau of Statistics (NBS). October’s growth was the slowest since July.

Beijing is attempting to tame soaring home prices by cracking down on riskier lending. It hopes to do so without triggering a crash.

Investment in the first 10 months of the year rose 7.8% from a year earlier, compared with 8.1% in Jan-Sept. The figure mainly focuses on residential real estate but also includes commercial and office space.

China‘s economy has surprised global financial markets and investors with robust growth of 6.9% so far this year, driven by a renaissance in long-ailing “smokestack” industries such as steel.

However average daily crude steel output fell for a second straight month in October from the previous month, as the world’s top steelmakers curbed output to help reduce smog over winter. Industrial output rose 6.2% in October from a year earlier, missing analysts’ estimates of a 6.3 percent gain and down from a 6.6 percent increase in September.

Property sales by floor area fell by 6.0% in October from a year earlier, compared with a 1.5% decline in September, according to Reuters calculations. The decline was the biggest since the first two months of 2015.

New construction starts measured by floor area, a telling indicator of developers’ confidence, were down 4.3% in October from a year earlier, Reuters calculations showed. Household loans, mostly mortgages, fell to 450 billion yuan in October from 735 billion yuan in September.

Chinese authorities have recently intensified efforts to curb illegal financing for mortgage down payments and have asked banks to step up checks on home buyers’ income authenticity.

China‘s housing market has been on a near two-year tear, giving the economy a major boost but stirring fears of a property bubble even as the authorities try to contain risks from a rapid build-up in debt.

Modest loss of momentum anticipated

In other data from the NBS, fixed-asset investment growth slowed to 7.3 percent in the January-October period. Analysts had expected an increase of 7.4 percent.

Surging Chinese growth in the first nine months has supported the global economy as Asia’s rising economic superpower has continued to hoover up commodities and consumer goods, helping to stoke underlying global demand for cars and smartphones to TVs and industrial products.

China‘s exports and import growth both eased in October, however, while the smog war dragged on manufacturing activity.

To be sure, data has yet to point to any marked deceleration in economic growth, and analysts see only a modest loss of momentum over the next few months. Indeed, China‘s producer prices were surprisingly strong in October, despite muted activity during a week-long holiday.

Retail sales gained 10% in October on-year, slower than the expected 10.4% rise. Retail sales growth has hovered in the 10 to 11% range for the last two years in a sign of resilient domestic demand.

Daily steel output dipped 2.5% to 2.334 million tonnes in October, from 2.394 million tonnes in September, according to Reuters’ calculations based on NBS data.

Steel mills in cities including Tangshan and Handan, in Hebei province, have been ordered to cut production in the winter months as the government tries to crack down on pollution.

Asian stocks faltered on Tuesday as China’s data disappointed and investors pondered whether a marked flattening in the US yield curve might ultimately be a harbinger of a slowdown there.

 

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