China Nominal GDP growth and nominal retail sales - YoY

Chart of the week   china economic cycle keeps slowing
Sources: NIM Solutions and Refinitiv

  • • Data on China released on Tuesday was a miss across the board. Industrial production at advanced at 5% YoY (vs. -6.3% in September) and, nominal retail sales fell by 0.5% YoY (vs. +2.5% in September) on their largest monthly contraction since Shanghai’s lockdown last April.

    • This macro data keeps pointing towards a significant slowdown in domestic demand largely driven by the government’s continued zero-Covid policy, which is leading to extended social fatigue. Noteworthy is that on the first public comments on Covid made by new Politburo Standing Committee, President Xi Jinping called to improve zero-COVID policy implementation, signaling the intent to balance it with the lingering economic costs. However, we should keep in mind that there have been similar messages in the past and, hence, hopes could once again be dampened especially as we head into winter.

    • Overall, although we could see a gradual relaxation, our central scenario remains that policy is unlikely to change significantly to consistently support domestic demand in the near term.

The views and opinions expressed are those of Natixis IM Solutions Strategy Team at the date of publication. These are subject to change at any moment and are not an investment advice. Please see the full disclosures at the bottom of this page.

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