China's retail sales beat forecasts

China’s faltering economy looked to have strengthened last month, after official data published on Wednesday showed larger-than-expected improvements in both retail sales and factory output.

According to the National Bureau of Statistics, retail sales rose 7.6% in October year-on-year, building on September’s 5.5% rise. Analysts had been expecting a 7% uplift.

Industrial production rose 4.6%, marginally ahead of September’s 4.5% increase and the strongest growth since April. Consensus had been for no change.

Fixed asset investment also improved following September’s 3.9% slump, up 2.9% year-on-year.

However, the embattled real estate sector continued to struggle. Property investment slid 9.3% year-on-year in the year to October, following September’s 9.1% slump.

The figures also benefited from base effects, after stringent lockdown measures a year previously weighed heavily on both consumer demand and industrial output.

Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, said: "China is likely to continue to use dollops of fiscal support to prop-up growth against the headwinds of falling property investment and exports in the first half of 2024.

"We see little chance of mega stimulus. Policymakers are keen to restructure the economy towards manufacturing - especially high-tech manufacturing - and away from the property sector, and recognise this means a longer, tortuous recovery."

Louise Loo, China economist at Oxford Economics, said: "Real economic activity appears to hold up relatively well for the Chinese consumer, although this is likely also helped by festivities-related spending in early October.

"Industrial production strengthened as destocking pressures further eased, but weaker-for-longer external demand may weigh eventually on its uptrend.

"China is in the middle of a multi-year housing correction, so property weakness will be a consistent theme over the next few years."

China’s heavily-indebted property sector was hit hard after Beijing moved to crack down on the sector. The economy has also been rocked by the authorities' lengthy zero Covid policy and weaker global demand.

The NBS data coincided with the latest decision on interest rates from the People’s Bank of China. It opted to keep its benchmark one-year medium-term loan facility (MLF) at 2.5%, as widely expected.