GDP growth slows, but still on track to hit annual target
China’s economy is slowing.
Per data released by the stats bureau (NBS) on Monday, real GDP grew by 4.8% y/y in Q3 – down from 5.2% growth the previous quarter, and the slowest growth rate in a year.
This data point is particularly grim: On a nominal basis – which incorporates price effects – GDP only grew 3.7% y/y.
- This is the tenth consecutive quarter nominal growth has lagged real growth – reflecting deeply embedded deflationary pressures.
Why it matters: Nominal growth better reflects how businesses and households experience economic conditions.
- Profits, wages, and government tax revenue are strongly correlated with nominal growth.
Despite the gloomy print, there are a couple of positives.
First, quarter-on-quarter growth momentum picked up.
- On a seasonally adjusted quarter-on-quarter basis, GDP grew by 1.1% q/q, up from 1.0% in Q2.
- That said, Q2’s q/q growth rate was actually revised down this month from a previous estimate of 1.1%.
Second, year-to-date GDP is now up 5.2% y/y.
- Even if the Q3 slowdown continues in the coming months, we are confident the economy can hit its annual GDP growth target of 5%.
Get smart: Beijing may be able to claim victory on its 5% goal, but the persistent nominal slowdown means the economy desperately needs more demand-side support to lift prices and profits.
What we’re watching: Will policymakers finally lean more on consumption and income support in the coming months?
