Date: Nov 20, 2024
In October, the economy experienced a broad-based recovery from the previous month's lows. This improvement was supported by the latest round of macro policies and a favorable shift in export dynamics. Export growth surged due to timing discrepancies, which, in turn, energized the export-linked industries. The push for equipment upgrades and consumer goods trade-ins buoyed manufacturing demand and investment. Infrastructure investment gained momentum as existing policies took effect and new ones accelerated. Real estate saw a lift in transaction volume due to supportive policies, but a sustained recovery will require improving consumer income expectations. To sum up, policymaking is about trade-offs; fiscal expansion is often more effective than monetary expansion in combating economic downturns. It's imperative to swiftly address the bottlenecks in policy implementation and loosen the reins on individuals to boost the economy.
The economy shows a comprehensive improvement from its recent lows. Key economic activity indicators rose in October compared to September. The manufacturing PMI, non-manufacturing business activity index, and the composite PMI output index increased to 50.1%, 50.2%, and 50.8%, respectively, signaling a broad-based economic upturn. All five major sub-indices for the manufacturing sector increased, and the service sector's business activity index ticked up by 0.2 percentage points to 50.1%, propelling the non-manufacturing business activity index higher. Service production surged 6.3% year-on-year, a yearly peak. A stock market trading boom in October drove the financial sector's production index up by 3.7 points to 10.2%, its highest level this year and a key growth driver. This also contributed to a 5.0% year-on-year increase in the national service sector production index for the January–October period.
Shipping schedule shifts spurred faster export growth. The export growth rate for October surged by 9.6 percentage points to 11.2% compared to September. This momentum propelled the year-to-date export growth rate to 6.7% through the month. Bucking the trend of a typical October lull, this year brought a noteworthy 1.8% increase in exports from the previous month, primarily attributed to typhoon disruptions that postponed some of September's exports to October, resulting in an unexpected year-on-year growth. On a country-specific basis, the export growth rates to major destinations rebounded.
Exports and policies keep industrial growth steady. From January to October, the value-added output of industrial enterprises above designated size rose by 5.8% year-on-year, unchanged from the first nine months. The manufacturing and mining sectors saw a pickup in production, while the utilities sector's growth eased to 5.4%. A resurgence in domestic demand improved the sales-to-production ratio, while the value of exports rose by 3.7% year-on-year. Policies on equipment renewal and consumer goods took effect: car production swung from negative to positive, and the output of new energy vehicles reached a record high. Production of charging piles surged by 25.2%, and industries such as smart consumer devices, shipbuilding, and battery manufacturing have shown substantial value-added growth. The production volumes of agricultural processing, excavating machinery, packaging equipment, and home electric heating appliances have all sustained double-digit growth rates.
Policy efforts keep investment growth on an even keel. From January to October, investment climbed 3.4% year-on-year, matching the pace set during the first nine months. The monthly manufacturing investment growth rate hit 9.9% thanks to large-scale equipment renewals, innovation, and industrial upgrading. Industry-wise, investment accelerated in sectors such as other transportation equipment, non-ferrous metals, food manufacturing, and chemicals. Infrastructure investment also accelerated year-on-year to 4.3%, the first increase since March. The real estate market experienced increased transaction activity, with the year-on-year decline in new commercial housing sales area and sales volume for January to October easing by 1.3 and 1.8 percentage points, respectively, compared to the January–September period. However, such improvement has not yet fed into increased investment.
Policies gave a marginal boost to consumption growth. In October, programs such as consumer goods trade-ins and the "Double 11" shopping spree fueled the year-on-year growth in retail sales, which climbed to 4.8%, up from September. Commodity retail sales growth reached 5%, driven by accelerated sales in home appliances, audio-visual equipment, cultural and office supplies, furniture, and automobiles at retail units above a certain threshold. Necessity consumption remained stable, and discretionary consumption showed modest gains. Auto retail experienced significant recovery, and the real estate chain surged, with the decline in retail sales of building and decoration materials narrowing. As a series of stimulus policies are gradually implemented and service supply is optimized, combined with holiday buzz, service spending is on a fast track.
Active regulation is steering prices towards stability. International crude oil prices dipped due to geopolitical factors, which, in turn, lowered prices in China's oil-related industries. Nevertheless, new policies appear to have revived demand for certain industrial goods, helping to curb the Producer Price Index's (PPI) monthly slide, which shrank by 0.5 percentage points month-on-month. Equipment manufacturing saw price drops due to global economic shifts and domestic sales promotion, slightly widening the PPI's year-on-year decline by 0.1 percentage point. Consumer Price Index (CPI) gains were modest in October, ticking up 0.3% year-on-year, a sign of stable prices overall. Non-food prices declined further by 0.1 percentage points, reflecting market dynamics, while food prices eased back to a 2.9% gain but continued trending upward.
