China’s economic momentum weakened further in October, weighed down by persistent softness in consumer spending and an intensifying downturn in the real estate market. The extended National Day holiday, which lasted from October 1 to October 8, also contributed to a slowdown in industrial production.
According to data released Friday by the National Bureau of Statistics, fixed-asset investment—a broad measure that includes construction, infrastructure, and manufacturing—declined by 1.7% during the first ten months of the year. This marks a sharper drop compared to the 0.5% decrease recorded through September. Market analysts had anticipated a 0.8% contraction, according to a Reuters survey.
The last time such a decline was observed in fixed-asset investment was in 2020, during the initial phase of the pandemic, based on historical records from Wind Information. On a month-on-month basis, the drop in October reached 11.4% year-on-year, the most significant since early 2020, as estimated by Goldman Sachs. Analysts attribute this steep fall to government efforts to reduce industrial overcapacity and ongoing challenges in the housing sector.
Within the broader investment category, real estate investment fell by 14.7% year-to-date through October, worsening from the 13.9% decline seen in the first nine months. Meanwhile, manufacturing investment increased by 2.7%, and spending on utilities—including electricity, fuel, and water—rose 12.5%.
Industrial output grew by 4.9% in October, down from 6.5% in September and below the expected 5.5% rise. The manufacturing sector contracted more than forecast, reaching its weakest level in six months, partly due to factory closures during the holiday period.
Retail sales rose 2.9% compared to the same month last year, slightly exceeding the 2.8% growth projected by Reuters. However, this marks the fifth consecutive monthly slowdown and the lowest reading of the year, according to LSEG data.
The urban unemployment rate, based on a household survey, edged down to 5.1% in October from 5.2% in September.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that the decline in fixed-asset investment was primarily driven by weak performance in property and infrastructure spending. Yuhan Zhang, principal economist at the Conference Board’s China Center, observed that growth in manufacturing investment has been uneven, with state-owned enterprises increasing outlays in areas like energy supply, while foreign direct investment saw a sharp decline.
He predicted that future investment would remain focused on infrastructure development, high-tech manufacturing, and industrial modernization, supported by targeted policy measures.
Additional data revealed continued distress in the housing market. New home prices dropped 0.5% in October compared to September—the largest monthly decline since the same period last year. On an annual basis, prices fell 2.2%.
Inflation data showed consumer prices increased by 0.2% year-on-year in October, marking the highest gain since January and the first positive reading since June, per LSEG. The core CPI, excluding food and energy, rose 1.2% annually, the strongest since February 2024, according to Wind Information.
China’s exports declined unexpectedly in October, the first drop in nearly two years, amid rising trade tensions with the U.S. Although a temporary agreement was reached late in the month—where Presidents Donald Trump and Xi Jinping agreed to reduce reciprocal tariffs and pause new restrictions—the outlook remains uncertain.
Economists caution that as earlier export surges taper off and global demand fails to fully compensate for falling shipments to the U.S., pressure on Beijing to boost domestic consumption will grow.
Zhang stated he does not anticipate additional stimulus measures before year-end, noting that the economy is still on track to meet its 5% annual growth target. However, fiscal policy could become more accommodative in early 2025.
GDP expanded by 4.8% in the third quarter, following growth rates of 5.2% in Q2 and 5.4% in Q1.
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China economic gloom mounts as housing slump intensifies and investment slides
China ‘s slowdown worsened in October, dragged by soft consumer demand and a deepening property downturn, with the long holiday period further denting factory activity. n nFixed-asset investment, which includes real estate, contracted 1.7% for the first ten months of the year, steepening from a 0.5% decline in the January-to-September period, data from the National Bureau of Statistics showed Friday. Analysts polled by Reuters had forecast a 0.8% drop. n nThe last time China recorded a contraction in fixed-asset investment was in 2020 during the pandemic, according to data going back to 1992 from Wind Information, a private database focused on the country. n nOn a single-month basis, fixed-asset investment fell 11.4% from a year earlier, the weakest reading since early 2020 when the first Covid lockdowns hit, according to Goldman Sachs ‘ estimates. The bank attributed the drop to Beijing ‘s efforts in reining in industrial overcapacity and the housing downturn. n nWithin that segment, property investment continued to decline, shrinking 14.7% in the year through October, compared with a 13.9% contraction in the first nine months. n nManufacturing investment rose 2.7% and utilities spending, which includes electricity, fuel and water supplies, climbed 12.5%. n nIndustrial output expanded 4.9% in October, slowing from a 6.5% the prior month and missing expectations for a 5.5% jump. n nChina ‘s manufacturing activity contracted more than expected in October, falling to the lowest level in six months, as a weeklong holiday that ran from Oct. 1 to Oct. 8 shuttered most factories across the country. n nRetail sales climbed 2.9% in October from a year earlier. While beating the 2.8% growth forecast in a Reuters poll, the consumption gauge fell for a fifth straight month to its lowest level this year, according to LSEG data. n nThe survey-based urban unemployment rate ticked down to 5.1% last month from 5.2% in September. n nThe sharp drop in fixed-asset investment was largely dragged down by lackluster investment in the property sector and infrastructure, according to Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. n nManufacturing investment has seen “modest and uneven growth,” with state-owned enterprises increasing spending on infrastructure, such as electricity, heat and gas supply, while foreign investment contracted sharply, Yuhan Zhang, principal economist of the Conference Board ‘s China Center, said in a note. n n”We will continue to see policy-directed investment in infrastructure, advanced manufacturing, and industrial upgrading,” he added. n nIn a sign of persistently weak demand in the beleaguered housing sector, separate official data released on Friday showed China ‘s new home prices dipped 0.5% in October from the previous month, the steepest month-on-month decline since October last year. Home prices fell 2.2% in October on an annual basis. n nConsumer prices rose 0.2% from a year earlier in October, the strongest inflation reading since January this year and the first positive growth since June, according to LSEG data. n nThe core CPI, which strips out food and energy, rose 1.2% from a year earlier, the highest since February 2024, according to data provider Wind Information. n nChina ‘s exports in October unexpectedly contracted for the first time in nearly two years as tensions with Washington over trade escalated before a deal was reached at the month ‘s end. n nU.S. President Donald Trump and Chinese leader Xi Jinping agreed last month to trim their tit-for-tat tariffs and suspend a raft of restrictive measures for one year. n nEconomists widely expect the as businesses ‘ front-loading activity tapers off, and global demand may not fully offset a deepening decline in U.S.-bound shipments, putting Beijing under greater pressure to stimulate domestic demand. n n”I don ‘t expect stimulus to happen in the rest of this year,” said Zhang, noting the economy appears to remain on track to achieve its 5% growth target, although fiscal policy may turn more supportive at the start of next year. n nChina ‘s economic growth slowed to 4.8% in the third quarter, following expansions of 5.2% in the second quarter and 5.4% in the first quarter.