Australian dollar rises as China GDP beats expectations
The Chinese economy has exceeded forecasts with its gross domestic product growing by 7.3 per cent in the third quarter.
The better-than-expected figure immediately pushed Australian dollar higher by 0.2 per cent to just over US 88 cents shortly after its release at 1:00pm (AEDT).
The market had predicted that GDP growth for the September quarter would be 7.2 per cent, a marked decline from the 7.5 per cent in the previous quarter.
Despite beating forecasts, the Chinese economy is still growing at its slowest rate since the March quarter of 2009, at the peak of the global financial crisis fallout.
Market Economics managing director Stephen Koukoulas said the mildly positive response from markets was a sign of relief that the numbers were not worse.
"China is still growing at a decent to good pace, which is a marked difference to the mixed news coming out of the US and the unambiguously bad news out of the Europe," he observed.
Other Chinese figures released today were more of a mixed bag, according to Mr Koukoulas.
Industrial production in September rose 8 per cent against a consensus figure of 7.5 per cent, rebounding from a shockingly weak reading of 6.9 per cent in August, while retail sales and fixed asset investment were moderately disappointing.
Retail spending expanded at a rate of 11.6 per cent in September down from 11.9 per cent in the in August.
Looking more broadly, Chinese inflation is at its holding at weakest levels in nearly five years and commodity prices are plunging.
ANZ argues economic growth is only likely to increase at best "modestly" in the next quarter "as massive policy easing is unlikely."
"While we do not see China will fall into a 'hard landing' scenario, we do see the risk of deflation is rising sharply," said ANZ's China chief economist Li-Gang Liu.
ANZ cautions that a rising real debt burden amidst tight monetary policy conditions would likely engineer a disorderly de-leveraging process, meaning strong action should be taken to avoid deflation.
Housing slowdown dampens growth
There are worries about the strength of the housing market as new home sales fall and home prices come down.
"The weakest part of China's economy is still the property sector. The government has relaxed some controls recently and property sales may pick up in the fourth quarter," said Wang Tao, analyst at UBS Hong Kong.
"However, we may not see improvement in sectors like heavy industry and we expect the economy to continue to slow down. Full-year GDP growth may slow to 7.2 per cent."
AMP chief economist Dr Shane Oliver says the Chinese economy is on track for growth of around 7.5 per cent this year.
"It's no boom, but no bust either," he said.
The soft figures now have some analysts starting to question whether Beijing will have to step in with another round of stimulus to lift the country's economic growth to its annual target of 7.5 per cent.
"They are not going to do a big stimulus. Today's numbers don't really suggest they have to do a big stimulus," said Tim Condon, head of research at ING Singapore.
"They can continue targeted measures. They've done quite a bit last couple of weeks, maybe that's enough.
In the minutes from the Reserve Bank of Australia's October meeting, members said they had received a briefing from Chinese authorities that they had the scope to ease policy "if needed to support GDP growth."
The next key insight into the Chinese economy will on Friday with the release of a number of important indicators tied to its rapidly cooling housing sector.
