Weaker retail sales loom over China’s economy despite some bright spots

BEIJING — China delivered a mixed economic report card for October on Wednesday as softening retail sales pointed to a consumption slowdown, even as a pickup in industrial output and investment suggested support measures may be starting to take hold.

Taken together with weak credit data the previous day, the latest readings suggest the world’s second-largest economy will continue to cool in the next few quarters.

Facing the weakest economic growth since the global financial crisis, Chinese policy makers are fast-tracking billion-dollar road and rail projects, pushing banks to increase lending, and cutting taxes to ease strains on businesses. And more measures are widely believed to be on the way.

“Policy measures, including funding support for private firms, need some time to show results. GDP growth in the fourth quarter could dip below 6.5%,” said Wang Jun, Beijing-based chief economist at Zhongyuan Bank.

Manufacturing has been supported by resilient exports as firms rush to ship goods to the US ahead of higher tariff rates, amid persistent trade tensions between the world’s largest economies. Investors are hoping for some progress from trade talks between US President Donald Trump and his Chinese counterpart Xi Jinping later this month.

But the bigger worry for China lies at home, with domestic consumption starting to slow amid mounting household debt, while the real estate sector — a major driver — continues to cool.

Retail sales rose 8.6% in October from a year earlier, the National Bureau of Statistics (NBS) said, the slowest since May. Analysts had expected only a marginal dip from 9.2% in September.

A prolonged slump in auto sales has put the world’s biggest car market on the verge of its first annual contraction since at least 1990, while garment sales are growing at the weakest pace in over two years, pointing to faltering consumer confidence.

“There are myriad reasons for this step-down in consumer spending: the increase in mortgage debt is eating into disposable income, investment returns are falling, and the closure of many online lenders is cutting off a key source of consumer finance,” Everbright Sun Hung Kai said in a note.

Beijing is hoping to offset the drag by cutting import tariffs and income tax — it is even reportedly considering making mortgage payments tax-exempt — but those policies may not have much impact, Everbright said. —