Economic growth in Nov was contributed by both the supply and the demand side. Industrial output and manufacturing investment beat our expectation whereas infrastructure investment moderated. Retail sales growth accelerated in Double 11 season, although catering sector remained weak.
- Industrial output expanded at a faster speed, rising 7.0% YoY on back of resuming demand in both domestic and overseas markets. Growth accelerated across a spectrum of manufacturing industries, particularly electrical machinery, general and special equipment, automobiles, computers, communication & electronic equipment and upstream raw materials industries. We expect industrial activities will keep up its momentum in 2021.
- FAI – manufacturing beat, infrastructure moderated and real estate remained strong. Rebound of manufacturing FAI beat our expectation, narrowing decline to 3.5% in Jan-Nov. Chemicals, equipment and electrical machinery all experienced notable FAI acceleration in Nov, in addition to high-tech industries. Contribution from infrastructure has been moderating, +1.0% in Jan-Nov but monthly growth inched down in Nov. Real estate investment remained robust this year, but may gradually weaken next year due to slowing down of land acquisitions, housing sales and new construction starts.
- Retail sales +5.0% in Nov, which was not surprising given all the promotion efforts during this year’s extended Double 11 season. Consumer discretionary, such as communication appliance, cosmetics and jewelry recorded faster growth in this shopping festival. Catering revenue, however, dipped 0.6% YoY in Nov after resuming positive growth in Oct. Recovery of the catering sector still lacks a strong footing likely due to reduction in dining-out after COVID-19.
- What to expect in the upcoming Central Economic Work Conference? We think two main topics should be on the watch list of the Central Economic Work Conference upcoming this week – 1) demand-side reform, which was outlined for the first time at top level; 2) policy directions and moves in post-pandemic era.
- Outlook and risks. We expect GDP growth in 4Q20 could exceed 6.0% YoY, lifting annual growth to 2.3%. We also expect increasing contribution from manufacturing investment and consumption thanks to more synchronized recovery of the demand and supply side. Major risks include 1) slower-than-expected global economic growth; 2) weak domestic demand recovery.
