China's Economic Pulse: Analyzing Q4 GDP and December Retail Sales Figures

China Q4 GDP/Dec retail sales – 17/01

There was some scepticism when China reported Q3 growth of 1.3%, despite evidence over the quarter of weak domestic demand.

In the 3-months since then we've seen retail sales show modest improvements in October and November, while industrial production numbers have remained steady. The weak demand in the Chinese economy is already being reflected in headline inflation numbers with both CPI and PPI in deflation, as Chinese authorities wrestle with the problems posed by Evergrande, Country Garden and latterly Zhonghzi.

After a slow start to Q4 there was a modest improvement in retail sales while industrial production remained steady at 4.6%. In November we saw a decent uptick in retail sales to 10.1%, however this was still below expectations despite the numbers including Chinese Singles Day sales, and weak comparatives given that a lot of China still hadn't come out of lockdown measures in November 2022.

Industrial production was better coming in at 6.6% the best performance since February 2022. For December retail sales are expected to slow again with an increase of 8%, although here again we need to be careful given that Chinese authorities relaxed lockdown measures at that start of December 2022 so the comparatives here could well see a sizeable skew.

Industrial production is expected to be unchanged at 6.6%, however Q4 GDP is still expected to slow to 0.9%.