Chinese data show no signs of economy collapsing

Chinese data disappointed but show no signs of an economy collapsing. A range of data was released in China this morning. Q3 GDP growth was in line with expectations, increasing 1.8% q/q and 6.9% y/y (consensus 6.8% y/y) but industrial production disappointed, falling to 5.7% y/y (August: 6.1%). 

As a comparison, the low point for industrial production during the financial crisis in 2008 was 5.4%, so the industrial activity is comparable to this very weak period. The monthly change fell to 0.4% (August: 0.5%) so still no sign of recovery. Fixed asset investment (current prices) fell to 10.3% y/y year-to-date in September (August: 10.9%, consensus 10.8%), the lowest level in 15 years. Finally, China's retail sales showed an increase of 10.9% y/y in September (August: 10.8%, consensus 10.8% y/y). 

The Chinese data show a continued rebalancing of growth; weaker industrial growth is compensated for by higher service sector activity, leaving GDP growth broadly flat, says Danske Bank. This has global implications, as the service sector is much less reliant on imports than the manufacturing sector. The Chinese GDP growth is expected to be broadly flat around 1.8% q/q in Q4, estimates Danske Bank. 

Last week's economic data were on the weak side; in the US, September retail sales disappointed, suggesting that momentum in private consumption is slowing, while industrial production declined in Europe in August, in line with expectations. In China, trade data showed exports falling less but the decline in imports increased.