It was a rather busy week for China as the currency battled to remain in the headlines amid political developments from New Zealand and Spain. Looking at an economical data heavy week, China report on its inflation and GDP figures against the backdrop of the twice a decade Communist party congress meet.
Although not all eyes were on China, investors were no doubt paying attention.
China CPI slows in September but PPI beats estimates
China’s inflation data was the first report to be released alongside the producer price index data. According to official data, consumer prices were seen rising 1.6% on the year in September, matching forecasts.
China Inflation Rate, September: 1.6%
Producer prices index rose 6.9%, beating estimates of a 6.3% increase on the year, according to data from China’s National Bureau of Statistics (NBS).
Inflation was forecast to rise 1.6% according to the economists’ poll. Consumer prices rose 1.6% as expected in September. But this was slower than the 1.8% increase that was registered in August.
In contract, PPI was forecast to rise just 6.3% with actual data crushing the estimates by a strong margin. The higher than expected price increase at factory gate showed that economic activity among China’s trade partners continued to grow; especially demand for raw materials.
The PPI data suggested that imported inflation is likely to rub off on the consumer side as well.
China GDP growth in line with estimates
Later in the week, on Wednesday, the NBS released the monthly GDP report. Official figures put China’s third quarter GDP at 6.8%. This was slightly slower than the 6.9% GDP expansion seen in the previous quarter.
China Annual GDP Growth Rate: 6.8% (Q3 2017).
The NBS said that growth was steady and positive economic developments were seen in the first three quarters. The current global economic recovery was also said to have contributed to the economic expansion.
The GDP figures came about as earlier in the week, the People’s Bank of China (PBoC) governor, Zhou Xiaochuan was quoted by the wires saying that the economy could post a 7% growth in the second half of the year. Zhou also said that he might retire after being at the helm of the PBoC for nearly fifteen years, although he refused to give out more details.
Overall, China grew at a pace of 6.9% in the first six months of the year. The PBoC governor’s projections were seen to be slightly hawkish compared to the projections given by the government earlier this year. On a quarterly basis, the third quarter GDP was seen rising 1.7% from the second quarter with revisions made to the previous quarterly GDP data.
Consumption, including government spending, was said to have contributed nearly 64% to the GDP activity from January through September months.
Retail sales were also stronger, rising 10.3% in September compared to a year ago.
The PBoC governor was also quoted by the media stating that he would work towards making the yuan a more freely convertible currency. However, the yuan is expected to maintain its trading band.
The broadly positive economic data was welcome news as the party congress event was underway. The GDP numbers especially beneficial for President Xi as he said that China was moving from a rapid growth model to being focused more on development.
Xi said that his country would continue to welcome foreign businesses and defend against any systemic risks and continue to strengthen the financial sector. The strong economic performance so far is expected to validate Xi’s view on the economy and is likely to provide theimpetus for the President to push forth with further economic reforms.