China's economic data shows mixed recovery as unemployment ticks up

China’s long-delayed economic data showed a mixed recovery in the third quarter, with unemployment rising and retail sales weakening in September despite a pickup in growth.
 

Gross domestic product grew 3.9% in the July-to-September period from a year ago, rebounding from almost stagnant growth in the second quarter when Shanghai was still in lockdown. The figure was stronger than the median estimate of 3.3% in a Bloomberg survey of economists.

The data were postponed by nearly a week as the country held its 20th party congress -- a key political event during which President Xi Jinping secured a third term as head of the ruling Communist Party and consolidated his power.

The monthly indicators for September painted a weaker picture. After four months of declines, unemployment rose to 5.5% in September from 5.3% in August. Retail sales growth slowed to 2.5%, compared to August’s 5.4% increase and far lower than the 3% estimated.

Industrial production rose 6.3% in September from a year earlier, more than August’s 4.2% rise and beating the 4.8% forecast from economists. Fixed asset investment rose 5.9% in the first nine months of the year, mainly in line with expectations.

The data was “mildly surprising on the upside,” largely due to the manufacturing sector, said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. The results will reinforce the government’s policy stance, he said, with a focus on “prudent and targeted” efforts.

The benchmark CSI 300 index slumped as much as 1% as of 10:00 a.m., after rising 0.5% earlier. The onshore yuan slid 0.3% to 7.2487 per dollar.

The economy “overcame” the negative impact from “multiple unexpected shocks,” the NBS said in a statement accompanying the data, adding that main indicators “have recovered and steadied to remain within a reasonable range.”

The country also released trade data Monday showing export growth slowing in September. Exports in US dollar terms expanded 5.7% last month from a year earlier, down from 7.1% in August, while imports rose 0.3%, unchanged from the prior month. That data was also delayed during the party congress.

What Bloomberg Economics Says...
 

September’s deceleration in China’s export growth adds to evidence that global demand is declining. Things may get even worse in 4Q, with a weakening global outlook meaning bleaker prospects for China’s exports. The diminishing buffer from exports -- a key growth crutch during the pandemic -- leaves the economy more vulnerable to the property downturn and Covid Zero restraints.

Eric Zhu, China economist

China is trying to stage a recovery as the third quarter was threatened by a smattering of smaller Covid outbreaks across the nation that resulted in mobility curbs and which dampened consumer and business confidence. 

During a speech after the close of the congress, Xi said China’s economy is “resilient” and vowed to deepen economic ties with other countries. 

“China cannot develop in isolation from the world. The world’s development also needs China,” Xi said, addressing an audience of Chinese and overseas journalists.

The economy has come under immense pressure, with economists now forecasting growth of just 3.3% for all of 2022 -- far lower than an official target of about 5.5% set earlier this year. Officials began downplaying that goal in recent months as it slipped out of reach, instead focusing on job stability and other metrics.