China’s industrial recovery likely to have continued in September

China’s real GDP growth is likely to decelerate just marginally in the third quarter; however, nominal output growth is expected to accelerate significantly due to faster improvement in producer prices. According to a Societe Generale research note, the real GDP is expected to have grown to 6.6 percent year-on-year in the September quarter, as compared with 6.7 percent annual growth seen in the second quarter.

China’s industrial sector growth is expected to have quickened further, as seen by the positive momentum in industrial production growth in the quarter. Similarly, secondary industry, which includes manufacturing, mining, construction and utilities, is also expected to have accelerated.

“We see IP growth reaching 6.4 percent yoy in October from 6.3 percent yoy in September, due partly to a positive base effect”, noted Societe Generale.

But a few significant sectors possibly softened slightly in annual terms. There is a negative base effect in the ‘other service category’ that accounts for 35 percent of the total output of the tertiary sector. Furthermore, real estate possibly weighed in the third quarter. Housing starts growth also decelerated to 5.8 percent in the July-August period from the second quarter growth of 12.6 percent annually. Meanwhile, growth in floor space sold weakened to 19.2 percent annually from 25 percent year-on-year.

“In any case, the housing sector situation is likely to deteriorate soon due to a wave of tightening policy measures that were introduced in major cities over the past two weeks”, added Societe Generale.

Meanwhile, retail sales growth in September is expected to have been underpinned by car sales yet again as consumers were possibly rushing to buy vehicles before the preferable tax policy expires in October. Also, infrastructure investment in fixed asset investment data is expected to receive continued support from the government, according to Societe Generale.