By Mark Magnier
BEIJING--New Chinese data shows a mixed economic picture, as the economy appeared on track to grow by at least 6.5% this year amid signs of slowing next year.
Retail sales rose a weaker-than-expected 10% in October from a year earlier, slowing from September's 10.7% growth, the National Bureau of Statistics said Monday. Meanwhile, it said that industrial output, a proxy for economic growth, expanded 6.1% in October from a year earlier, matching September's pace but remaining a hair below economist expectations.
The bureau said fixed-asset investment, a closely watched gauge of construction activity, climbed by 8.3% year on year in the January-October period, as economists expected.
For now, the economy remains solidly on track to reach its 6.5% to 7% target for 2016 following growth of 6.7% in the first three quarters, many economists said.
"We're looking at stability for now," said Macquarie Group Ltd. economist Larry Hu. "We're in a kind of a sweet spot, although next year things are likely to see a slowdown by the second quarter."
Slowing auto and property sales dragged down October retail sales, which grew at their weakest pace in five months, a trend that economists predict will continue next year as real estate ebbs further.
Economists said decelerating retail sales last month were prompted by the winding down of tax breaks that have fueled auto sales in recent months. Consumption also was hurt by government purchase restrictions aimed at tempering speculative growth in major property markets, which has dampened demand for furniture and other household products, they added.
Last week, the central bank cited the danger of asset bubbles in the increasingly leveraged economy. Housing sales rose 38.3% by value in October from a year earlier, according to calculations based on data released by the statistics bureau Monday. Their value grew by a torrid 61.2% in September.
Industrial production continued to grow at a steady pace last month, helped by easy money policies, economists said. Coal, steel and cement prices have jumped in recent weeks, pushing up rail freight volumes last month to their highest level in over a year. But this has also led to higher raw material costs for manufacturers.
Alida Building Material Supplies Co. based in the southern city of Shenzhen, said rising stainless steel and zinc prices used in making its ventilation ducts have prompted the company to pare investments and hirefewer workers.
"Our 10% profit margin is now down to 5% because of higher commodity costs," said Xiao Peng, Alida's sales manager. "I am not sure what the next few months will bring, but I'm not very optimistic."
In terms of investment, state infrastructure spending remained strong, while still-weak private investment grew at a slightly faster 2.9% pace in the first 10 months of the year compared with 2.5% for the first three quarters, the statistics bureau said. Beijing is likely to rely on fiscal expansion, particularly infrastructure investment, to prop up growth in coming quarters, said RHB Group economist Zhang Fan.
Economists say China is trying to push banks into lending more to the real economy rather than funneling capital into speculative investments. But rising interbank rates on longer maturities suggest that financial institutions are dragging their feet.
This is seen in bank lending to companies, which fellsharply in October according to central bank data released Friday, suggesting that underlying demand remains sluggish.
"The slow growth in corporate credit also signals banks' concerns about the economic outlook and credit risks," said ANZ in a note.
Pei Li and Liyan Qi contributed to this article.
Write to Mark Magnier at email@example.com
(END) Dow Jones Newswires
November 13, 2016 23:58 ET (04:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.