Incoming macro data confirm that China’s economic recovery from the covid-19 shock continues to strengthen and broaden.

Initially, this recovery was led by the supply side and by industry, partly reflecting targeted government policies aimed at getting production up and running again as soon as possible (this contrasts a bit with policies in advanced economies, which mainly targeted the demand side).

These policies are illustrated by a V-shaped recovery of for instance industrial production, while also having supported Chinese exports throughout the year (as Chinese firms came ‘out of lockdown’ quicker than foreign competitors).

That said, the demand side is showing a clear recovery as well. Pandemic support is feeding through in a revival of public investment and credit growth.

Moreover, China’s success in containing the pandemic has enabled the phasing out of restrictions and a rebound in confidence, supporting consumption as well.

And while the services sectors formed the ‘epicentre’  of the covid-19 shock, services PMIs have surpassed manufacturing PMIs again in the course of this year This was typically the case before the pandemic broke out.

2.   October data show momentum still strong

The October data show that growth momentum remains strong at the start of the final quarter of this year.

Industrial production growth was stable at 6.9% yoy , while growth of both retail sales and fixed investment picked up further.

Retail sales accelerated to 4.3% yoy (September: 3.3%), although coming in below expectations  (consensus: 5.0%). China’s official urban unemployment rate has fallen back to almost pre-corona levels (October: 5.3%, vs 5.4% in September and 5.2% in December 2019).

Urban fixed investment accelerated to 1.8% yoy ytd (September: 0.8%, consensus: 1.6%). To a large extent, this is a reflection of pandemic fiscal support, with public investment (+4.9% yoy in Jan-Oct) still doing better than private investment (-0.7%).

All in all, Bloomberg’s monthly GDP growth estimate rose to a 16-month high of 6.9% yoy in October (September: 6.75%). Still, the pace of acceleration has come down in recent months, as catch-up effects from the covid-19 collapse are fading.