China's factory output up, but consumption still a drag

China’s industrial output growth quickened slightly in November, while retail sales disappointed, keeping pressure on Beijing to ramp up stimulus for a fragile economy as it braces for more US trade tariffs under a second Trump administration.

The mixed set of data underlines the challenges facing Chinese leaders heading into 2025, when trade relations with the United States could worsen at a time when domestic consumption also remains weak.

China’s industrial output grew 5.4 per cent in November year-on-year, up from the 5.3 per cent pace seen in October, data from the National Bureau of Statistics (NBS) showed on Monday, beating expectations for a 5.3 per cent increase in a Reuters poll.

However, retail sales, a gauge of consumption, grew just 3.3 per cent last month, much slower than a 4.8 per cent rise seen in October. Analysts had predicted a 4.6 per cent expansion.

The weaker retail figures come despite a boost from major online shopping promotions and government-subsidised trade-in programs that have boosted sales in sectors including vehicles.

Fixed asset investment also increased at a slower 3.3 per cent pace in January-November from the same period a year earlier, compared with an expected 3.4 per cent rise. It grew 3.4 per cent in the January to October period.

NBS spokesperson Fu Linghui told a media briefing that the trend of recovery in consumption has not changed and that officials would implement more policies to boost domestic demand.

At last week’s Central Economic Work Conference (CEWC), a closely-watched agenda-setting meeting, China’s top leaders pledged to raise the budget deficit, issue more debt, and make boosting consumption a top priority.

The remarks echoed commitments made by a meeting of top Communist Party officials, the Politburo, earlier this month, which endorsed an “appropriately loose” monetary policy in the first easing of its stance in 14 years.

Policymakers continue to grapple with a years-long property crisis that is dragging on consumer confidence and the broader economy, with some 70 per cent of household savings parked in real estate.

There was some encouraging signs on China’s new home prices, which fell at the slowest pace in 17 months in November.

Officials in recent months have doubled down on efforts to encourage homebuying, including cutting mortgage rates and minimum down-payment ratios, as well as tax incentives to lower the cost of housing transactions.

However, most analysts say a sure-footed recovery in the real estate sector appears to be some way off.

Reuters has reported that policy advisers have recommended that Beijing maintain a growth target of around 5.0 per cent for next year, with one government economist saying that China can offset the impact of expected US tariffs on its exports by further boosting domestic demand.

Trump, who is set to start his second term as the US president in January, has threatened tariffs in excess of 60 per cent on imports of Chinese goods.

A recent Reuters poll predicted China will grow 4.5 per cent next year, with new US tariffs potentially shaving up to 1 parentage point off growth.