Besides domestic demand and pains from trade dispute, seasonality factors were also to blame for muted economic data in Oct, such as 1) the National Day holiday, which caused temporary interruptions of manufacturing and construction activities; and 2) the “Double 11 Festival”, which held back consumers’ purchase decisions till Nov. Beyond transitory factors, however, we still expect to see stabilization of economic performance in Nov and Dec, boosted mainly by consumption and infrastructure investment.
- Manufacturing- automobile +4.9% YoY. Industrial value-added growth dived to 4.7% YoY in Oct. Both mining and manufacturing sectors decelerated, including high-tech industries. This trend was consistent with what PMI and other high-frequency monitors indicated. The bright spot was automobile manufacturing, of which value-added increased 4.9% YoY and remained on its recovery track. We think manufacturing output is likely to stabilize in Nov and Dec, taking into account lower base last year and less stringent environment protection regulations.
- FAI – mild deceleration of real estate and infrastructure whereas manufacturing stood up well. FAI growth inched down to 5.2% YoY in Jan-Oct from 5.4% in 9M19. 1) Manufacturing investment growth stayed at 2.6% YoY in Jan-Oct, inching up 0.1ppt from that in 9M19. 2) infrastructure investment decelerated a bit, increasing 2.0% YoY in Oct and 4.2% YTD, but is likely to hold up well because the State Council injected another dose of infrastructure boost on its 13 Nov executive meeting to lower minimum capital requirement for certain projects. 3) Real estate investment growth, which decelerated to 10.3% YoY in Jan-Oct, may continue to decline but only modestly because 1) land transaction fee, a leading indicator for land acquisition investment, has been narrowing its decline since Aug to -15.2% YoY in Jan-Oct; and 2) new housing starts and areas in-construction maintained steady pace of growth to lift construction expenses.
- Retail sales –consumers were waiting for Nov discounts. Headline/Ex-car retail sales value growth was 7.2%/8.3% YoY in Oct, vs. 7.8%/9.0% in Sep. We believe such weakness was partly due to the fact that consumers had held back their purchases to wait for “Double 11” discount in Nov. Clothing, cosmetics, household appliances and other consumption items experienced meek growth in Oct. Car sales remained on a recovering track, although YoY decline in Oct enlarged to 3.3% from 2.2% in Sep. Taking all into account, we think retail sales figures are likely to rebound in Nov.
