With Xi preparing to address delegates from 130 nations around the world at the third Belt and Road Initiative Forum, we should not be too surprised if the deluge of Chinese macro data tonight - headlined by Q3 GDP - will beat expectations.
In fact, as Bloomberg's Chang Shu and David Qu noted, China’s recovery could be starting to get some traction, supported by stronger public investment and monetary easing, as weekly activity data rebounded in September...
...and overall China data has surprised more to the upside in recent months (admittedly against very weak expectations)...
However, bear in mind that base effects will dampen the year-on-year readings.
Growth in 2Q23 was flattered by a comparison with a depressed performance in 2Q22 caused by the Zero-COVID lockdowns. That boost will be gone in 3Q23, so most economists will be focused on the QoQ growth.
The Yuan has been relatively stable since the end of Q2, after plunging in Q1 and Q2...
And, despite all the pumping and support, China's Credit Impulse remains negative (for the 5th month in a row) as its real estate market continues to implode sucking up every yuan to fill the hole-filled bucket balance sheet of Chinese citizenry...
Oh and while we are discussing that, China Property Stock gauge plunged to its lowest since 2009...
So, eyes down for a fun night of 'adjustments' from Beijing.
China's GDP growth YoY in Q3 was expected to come in at +4.5% (down from +6.3% in Q2) but most eyes will be focused on the QoQ number (+0.9% exp) due to base effects from the COVID lockdowns.
The headline QoQ GDP printed +1.3% (better than expected).
Helped by a downward revision for Q2 from +0.8% to +0.5%. The headline YoY data beat expectations (+4.9% YoY vs +4.5% exp and +5.2% YTD YoY vs +5.0% YTD YoY exp)...
Industrial Production and Retail Sales beat expectations...
*CHINA SEPT. INDUSTRIAL OUTPUT RISES 4.5% Y/Y; EST. 4.4%
*CHINA SEPT. RETAIL SALES RISE 5.5% Y/Y; EST. 4.9%
While the data show increasing consumer spending growth, the big downside is that China’s property slump is still deep and ongoing.
*CHINA JAN.-SEPT. FIXED INVESTMENT RISES 3.1% Y/Y; EST. 3.2%
*CHINA JAN.-SEPT. PROPERTY DEV. INVESTMENT -9.1% Y/Y, EST. -8.9%
Worse still, the area of property sold fell 7.5% in September, lower than -7.1% seen the previous month.
Chinese unemployment miraculously tumbled to 5.0% - the lowest since Oct 2021.
Of course, China continues to hide its youth unemployment rate - after it reached record highs at 21.3% in June.
China's statistics bureau said in the release, overall, China’s economy continued to recover in the first three quarters, laying a “solid foundation” for achieving the full-year development goals. Although, China once again warned of the external environment, saying it is becoming more complex and severe.
Under the hood, the fastest growing retail sales categories relate to vice and virtue.
Tobacco and alcohol sales were up a massive 23.1% year-on-year, a remarkable number (the highest recorded since April 2021). Sports items sales surged 10.7%.
So to sum things up - while investment (especially property) continues to be ugly everything else beat (miraculously)
Michael Hirson of 22V Research says in a note he’s paying most attention to signs of any recovery in household and private sector demand.
“Property sales and related indicators will provide a sense of whether recent easing measures are having an effect preliminary data suggest a pick-up in sales in the largest markets (tier 1 and some tier 2) but one that is thus far limited in its strength and breadth,” he wrote in a note.
“On the consumption side, August showed some improvement in household spending on goods, rather than just services, and it will be important to see whether there are further signs of progress as reflected not only in monthly retail sales but also the quarterly survey of household income and spending.”
Given his thoughts, property sales and investments data were ugly - not a good sign... and on the consumption side, everyone was celebrating their non-job 'job'.
The bottom line from the data - China bottomed... a perfect narrative for Xi.
