CHINA’S October economic activity perked up as industrial output grew at a faster pace and retail sales growth beat expectations, an encouraging sign for the economy.

The world’s second-biggest economy has sought to mount a strong post-COVID recovery as the property weakness, slow global growth and geopolitical tensions have dented momentum.

China’s industrial output grew 4.6% in October year on year, accelerating from the 4.5% pace seen in September, data from the National Bureau of Statistics (NBS) showed yesterday, beating expectations for a 4.4% increase in a Reuters poll. It also marked the strongest growth since April.

Retail sales, a gauge of consumption, rose 7.6% in October with improvement in both auto and restaurant sales growth, quickening from a 5.5% gain in September and hitting the fastest growth since May. Analysts had expected retail sales to grow 7% due to the low base effect in 2022 when the COVID pandemic disrupted consumers and businesses.

Analysts struck a cautious note on the upside data surprise, noting that the property sector remains a weak link for the economy.

Louise Loo, China economist at Oxford Economics, said prolonged weakness in external demand could hamper industrial production despite strengthening last month as destocking pressures eased further.

Consumption didn’t make much headway either during the eight-day Golden Week holiday earlier in October. Trips made in that period missed government estimate.

The nationwide survey-based jobless rate stayed at 5% in October, unchanged from September, the NBS data showed.

China has been ramping up efforts to revive its post-COVID economy with a slew of policy support measures in recent months.

Authorities are faced with a challenging task as any aggressive monetary support would further widen interest rate differentials between China and the West, especially the United States, and dent the yuan. The government is also wary of a return to the big-bang fiscal stimulus of the past.

The economy grew faster-than-expected in the third quarter, with analysts generally expecting it to reach the government’s full-year growth target of around 5%, though a full-blown recovery is still some time away.

The central bank, People’s Bank of China, boosted liquidity injections but kept the interest rate unchanged when rolling over maturing medium-term policy loans yesterday, matching market expectations.

In a rare revision last month, the government also lifted its 2023 budget deficit to around 3.8% of gross domestic product from 3% to account for the planned issuance of 1 trillion yuan (US$137.10 billion) in sovereign bonds.

The central bank has cut banks’ reserve requirement ratio (RRR) twice this year to free up liquidity to aid the economic recovery. Analysts widely expect another RRR cut in the final months of this year.

China’s property sector has yet to see a meaningful rebound despite strengthened support measures for homebuyers, including relaxing of home purchase restrictions and lowering in borrowing costs.

Property investment fell 9.3% in the January-October period year on year, after a 9.1% drop in the January-September period.

Fixed asset investment expanded 2.9% in the first 10 months from the same period a year earlier, versus expectations for a 3.1% rise. It grew 3.1% in the January-September period. (SD-Agencies)