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• Retail sales surged to their highest level since May 2023.
• China's unemployment data ticked lower to a 16-month low.
• Published unemployment data excluded youth joblessness and Moody's downgraded the property sector.

China’s surveyed urban unemployment rate for the month of August 2023, declined to 5.2% YoY, as compared to the previous month’s print of 5.3% YoY, receding to a 16-month low.

A market forecast by TradingEconomics.com had suggested that the rate would see an uptick to 5.4% YoY.

The release comes a day after policymakers announced a surprise rate cut of a quarter percentage to its reserve requirements, a move which becomes operational today.  

Source: TradingEconomics.com

However, China’s data has recently come under the scanner as the National Bureau of Statistics (NBS) chose not to report the unemployment rate in the 16 to 24 age group starting last month.

The agency has not provided any clarity on when the data for this segment will become available.

The improvement in unemployment came despite a steep fall in real estate investment and a broader slowdown in infrastructure investment even as government authorities have been trying to roll out a slew of supportive measures.

Industrial production

Industrial production numbers rose 4.5% YoY, against a consensus forecast of 3.9% YoY as reported by TradingEconomics.com.

Further, this was a robust improvement over last month’s reported growth of 3.7% YoY.

This also marked the fastest pace of growth in the industrial production index since April 2023, reaching a 4-month high, following a strong performance in manufacturing (up 5.4% YoY from last month’s 3.9% YoY) and mining activities (which increased to 2.3% YoY from 1.3% YoY).

Source: TradingEconomics.com

Chemicals and extraction of petroleum and natural gas saw the sharpest increases of 14.8% YoY and 7.2% YoY, respectively.

However, production declined sharply for ferrous metals’ processing-related activities by 14.5% YoY, although this was an improvement from the decline of 15.6% YoY in the previous month.

From January to August 2023, industrial output has improved by a cumulative 3.9% YoY.

Retail sales

Retail sales exploded higher to 4.6% YoY in today’s release, compared to 2.5% YoY in the previous month, outperforming a consensus forecast of 3% YoY as reported by TradingEconomics.com.

This marked the eighth straight improvement since entering positive territory at 3.5% YoY in January 2023, while the best-performing month remained that of May 2023 at 18.4% YoY.

This is also the first uptick seen in retail sales since May 2023, with consumption growth remaining positive but easing for the previous three months.  

Source: TradingEconomics.com

Other data releases

In other economic data from the country, housing prices across 70 major cities declined by 0.1% YoY, underperforming 0% forecasts, while falling at the same pace as last month’s report.

On a monthly basis, home prices were down by 0.3% on aggregate.

This does not bode well for the real estate sector which has been struggling with a severe downturn and broader economic stagnation.

As per the NBS, prices of homes in Shenzen and Guangzhou fell by 3% YoY and 1.4% YoY, respectively.

Both showed a steeper drop as compared to the previous month.

On the other hand, Beijing and Shanghai witnessed increased costs which grew at 2.8% YoY and 4.1% YoY, respectively.

For August, China’s fixed-asset investment improved by 3.2% YoY, as against market forecasts of 3.3% YoY, a marked slowdown from 3.4% YoY recorded during the last month.

Investment in real estate plummeted 8.8% YoY, while investments in the primary sector declined by 1.3% YoY.

The secondary sector improved to 8.8% YoY as against the previous reading of 8.5% YoY, particularly due to a strong showing from manufacturing industries.

Economic context

Responding to the challenging economic situation post widespread and lasting health restrictions, as well as the dire straits that the property market finds itself in, Chinese officials have maintained a relatively easy monetary policy, eased the reserve ratio for financial institutions, and reduced the one-year loan prime rate.

However, the situation was exacerbated yesterday, with Moody’s downgrading their outlook of the property sector to negative for the next 2-4 quarters, re-emphasizing that real estate remains a massive concern.

Despite the spike in retail sales, the health of the consumer remains uncertain, and markets will wait and watch to see how sustainable the government’s measures prove to be.

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