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China growth slows in Q3 amid supply chain issues, power shortages

By Michele Maatouk

Date: Monday 18 Oct 2021

LONDON (ShareCast) - (Sharecast News) - China's economic growth slowed sharply in the third quarter amid power shortages and supply chain issues, according to figures released on Monday by the National Bureau of Statistics.
Growth slowed to 4.9% in the three months to the end of September from 7.9% in the previous quarter and marking the weakest growth in a year. This was below economists' expectations for a 5.0% increase. Growth also slowed sharply in seasonally-adjusted quarter-on-quarter terms, from 1.2% in the second quarter to 0.2% in the third.

The slowdown came amid a number of headwinds such as the crisis at property developer Evergrande and energy issues that forced factories to reduce output.

Fu Linghui, a spokesperson for the NBS, said at a press conference: "After entering the third quarter, risks and challenges at home and abroad increased with the pandemic continuing to spread and the recovery of the world economy slowing down."

Pantheon Macroeconomics economist Craig Botham said a slowdown in the y/y was always on the cards given base effects, but the q/q slowdown reflects the headwinds that arose in the third quarter.

"An obvious candidate for such a headwind is the energy crisis that emerging in September, and sure enough, delving into the subcomponents, there was a particularly sharp slowdown in secondary sector GDP growth, from 7.5% y/y to 3.6%," he said.

"Meanwhile, tertiary sector GDP growth also saw a considerable slowdown, to 5.4% y/y from 8.3%. A larger part of this decline can be attributed to base effects, but still, we think this also shows the chill extending across the property sector. We will need to wait for a more detailed industry breakdown to confirm the drivers, but the monthly data does seem to support this interpretation."

Figures also showed that industrial production grew by 3.1% in September year-over-year, down from 5.3% in August and marking the slowest growth since March 2020, with manufacturing hit hard by supply chain disruptions and chip shortages.

Retail sales rose 4.4% on the year in September, up from 2.5% in August. Botham said a rebound had been on the cards after the surprisingly strong services surveys, driven by fading Covid outbreaks and the attendant easing of restrictions.

"A breakdown of the data reveals that, for example, catering services performed particularly well, bouncing back to 3.1% y/y growth in September after contracting 4.5% in August," he added.