China’s economy probably slowed down further in Q3 and may well continue to do so. Bloomberg consensus thinks the economy grew by 7.2% y/y in Q3 compared to 7.5% in Q2. That would be the slowest growth rate since 2009Q1 which, well, you may recall to have been a rather aging influence on your life. Back then, growth bottomed at 6.2% y/y which serves as a reminder to those who may think sub-7% growth would be an unprecedented disaster. Coming off the Asian financial crisis, China hit a low of 6% y/y growth back in 1999Q4. Consensus thinks the economy will grow spot on the 7% mark in each of the next two years.
Higher frequency Chinese growth gauges like retail sales, industrial production and the private sector’s manufacturing PMI will be more closely watched next week particularly in terms of whether the abrupt deceleration in industrial output will continue. At 6.9% y/y output growth, the industrial sector is at its weakest growth rate since late 2008 and key sectors are stumbling (chart 4). Growth in car production has been snuffed out from 13% y/y growth in May to nothing in August. Electricity output — often used as a data quality crosscheck on other output data including GDP — is down 2.2% y/y. Over the course of this year, output growth has notably decelerated for cement, crude steel, and steel product. Broadly-based weakness reinforces concern over the softer headline prints that China has been producing of late. As Europe — China’s biggest export market — continues to decelerate, worse may yet lie ahead for the Chinese economy but in the context of enormous insulating strengths in measures of external finances. Just under half of forecast shops surveyed by Bloomberg believed that China’s economy was going to post sub-7% growth in Q4 well before recent market turmoil and when softness in European data was a little less clear last month. That share is likely to go up now.
