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PrintThe National Bureau of Statistics reported Q3 GDP and the remaining September economic indicators today. The most important indicators including Q3 GDP growth and September IP growth are in line with expectations. We maintain our view that GDP growth will improve marginally in Q4.
Q3 GDP growth came in at 7.4% yoy, identical to our and market expectations. This is lower than 7.6% in Q2 and marks the sixth quarterly decline in yoy growth rates. The main reason for the GDP deceleration is weaker IP growth, which is partially offset by slightly stronger agriculture and service sector activities.
IP growth rose to 9.2% yoy (identical to our forecast but slightly better than market consensus) in September, up from 8.9% in August. Clearly, IP growth benefited from the end of inventory de-stocking from mid-September. Acceleration in yoy IP growth in seen in textile, auto and telecom equipment sectors in September.
Retail sales growth accelerated to 14.2% yoy in September, improving from August's 13.2% and market expectation of 13.2%. A few product items that stood out with above 20% yoy retail growth are furniture (+27%), medicines (+27%), telco equipment (+25%), and apparels (+20%). The weakest item is auto, which saw retail sales growth at 1.7% yoy.
Fixed assets investment, of which data quality is questionable in our view, rose 20.5% yoy in Jan-Sep, up marginally from the 20.2% rate in Jan-Aug. In our macro analysis, instead of looking at FAI, we pay special attention to the more reliable capex growth of about 2000 listed companies. We found that in the first half of this year, these listcos' capex growth decelerated sharply to 7% yoy, a trend that is more consistent with evidence from the corporate world and the decline in profits. This suggests that actual investment growth is likely to be much weaker than the impression given by FAI growth and the corporate "adjustment process" to reduce over-capacity has already started.
At the sector level, the FAI report shows that railway FAI growth yoy recovered sharply to 79.6% in September, up from -24% in Jan-Aug. We expect this trend of stronger railway investment growth to continue for a few months. This is the main aspect of policy support for the economy this year, and should continue to benefit railway-related industries. On the other hand, as real estate floor-space started continue to declined by 8.6% yoy in Jan-Sep, we see further deceleration in real estate investment in the coming few months.
Looking forward to the next few months, see improvement in demand for raw materials due to inventory restocking and stronger capex growth in infrastructure. However, export growth may remain sluggish due to weakness in G3 demand, and manufacturing and real estate investment may continue to decelerate. On balance, we see GDP growth recovering modestly to 7.7% in Q4 from 7.4% in Q3
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