China's economic activity likely regained some strength last month, giving policy makers a bit of breathing room to focus on keeping financial risks in check.
After a lackluster showing in September, industrial-output growth likely edged up in October and prices marched upward, while new bank credit nearly halved, according to a survey of 14 economists by The Wall Street Journal.
A bevy of data to be released in the coming days is expected to add to evidence showing the world's second-largest economy in steadier shape than at the beginning of the year.
"We expect October's data release to show a surer footing," said economists of UBS Securities Asia Ltd.
Industrial output, a rough proxy for economic growth, likely grew 6.2% in October from a year earlier, compared with a 6.1% increase in September, the survey showed. Fixed-asset investment outside rural households, a key gauge of construction activity, likely expanded 8.3% for the January-to-October period, slightly faster than an 8.2% increase over the first nine months. Retail sales likely climbed 10.7% in October, matching September's growth.
Those signs follow other positive data points. An official gauge of factory activity, released early this week, rose to its highest level in two years, driven by higher commodity prices and a property boom that are stabilizing the wobbly economy.
With the pickup in activity, prices for raw materials and food likely pushed up inflation, though not high enough to trouble policy makers, economists said.
The consumer-price index, a main gauge of inflation, probably rose 2.1% from a year earlier last month, faster than a 1.9% growth in September, the survey of economistssaid.
The producer-price index likely climbed 0.9% from a year earlier last month, accelerating from a 0.1% rise in September. Before September's uptick, the gauge of factory-gate prices had remained in deflationary range for more than four years, and the turnaround signals improving business conditions.
With growth on a firmer footing, the government seems to be retacking to try to control asset-price bubbles and potential financial risks, UBS economists said.
Chinese banks probably issued 700 billion yuan ($103 billion) in new credit last month, much smaller than September's 1.220 trillion yuan, the same survey showed.
Apart from seasonal factors, the smaller amount of new credit reflects the government's effort to curb lending to an overheating property sector, said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.
Medium- and long-term household loans, almost all of which are mortgages, made up 60% of all new loans created in the third quarter, up from 47% in the second quarter and 23% in the first. In the first half of October, two dozen cities asked banks to tighten home-lending standards.
On top of trying to calm the housing market frenzy, Beijing also faces accelerated capital outflows.
China's hoard of foreign-exchange reserves likely fell by around $40 billion last month to $3.126 trillion, after dropping $18.79 billion in September, the same survey of economists showed.
October's drop would be the largest monthly decline since January, when they shrank by $99.47 billion, and would mark the fourth straight monthly drop. Capital outflows picked up pace last month as the yuan softened against the U.S. dollar by about 1.5% in October, economists said.
Outbound shipments likely declined 5.7% from a year earlier in October, improving from September's 10.0% slump, while imports likely dropped by 1.1%, compared with September's 1.9% decline, the same poll showed. That would bring the country's trade surplus to $51.80 billion last month, widening from September's $41.99 billion.
A slightly larger trade surplus, however, wouldn't be enough to offset an expected larger erosion in the world's largest reserves of foreign exchanges, economists said.
(END) Dow Jones Newswires
November 04, 2016 06:03 ET (10:03 GMT)
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