China’s economic rebound accelerates as consumers open wallets

China’s economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution, but the growth rate missed forecasts, pointing at persistent challenges for one of the world’s few engines of demand.

Gross domestic product (GDP) grew by 4.9 percent in the July-September quarter from a year earlier, official data showed on Monday, slower than the median 5.2 percent forecast by analysts in a Reuters News Agency poll. The figure was faster than the 3.2 percent growth rate in the second quarter.

“China’s [third-quarter] GDP data showed that the Chinese economy continues to rebound from the economic shockwaves of the Covid-19 pandemic that hit the economy hard in Q1 2020,” Rajiv Biswas, chief Asia Pacific economist at research firm IHS Markit said in an email to Al Jazeera.

“The near-term outlook is for continued improvement in China’s economic growth momentum in the last quarter of 2020, helped by improving domestic retail spending and strong export shipments to the US and Europe for the Christmas season sales,” Biswas added.

China’s currency, the yuan, and key stock indices trimmed gains following the weaker-than-expected data, with the benchmark Shanghai index trading 0.6 percent higher and the CSI300 index up 0.8 percent after rising as much as 1 percent and 1.2 percent, respectively.

The world’s second-largest economy grew by 0.7 percent in the first nine months of 2020 from a year earlier, the National Bureau of Statistics (NBS) said.

Policymakers globally are pinning their hopes on a robust recovery in China to help restart demand as economies struggle with heavy lockdowns and a second wave of coronavirus infections.

China has been steadily recovering from decades-low growth seen in the first months of the year caused by coronavirus shutdowns.

On a quarter-on-quarter basis, GDP rose 2.7 percent in July-September, the NBS said, compared with expectations for a 3.2 percent rise and an 11.5 percent rise in the previous quarter. But several recent indicators have pointed to a broader upturn in consumption, as well, in the third quarter.

‘Rapid rebound’

Retail sales grew 3.3 percent in September from a year earlier, speeding up from a modest 0.5 percent rise in August and posting the fastest growth since December 2019. Industrial output grew 6.9 percent after a 5.6 percent rise in August, showing the factory sector’s recovery was also sustaining momentum.

Fixed-asset investment – spending on land, equipment or infrastructure – rose 0.8 percent in the first nine months from a year earlier, after dipping 0.3 percent in the first eight months.

“China’s economy continued its rapid rebound last quarter, with the recovery broadening out and becoming less reliant on investment-led stimulus. What’s more, the monthly data show that growth was still accelerating heading into [the fourth quarter],” Julian Evans-Pritchard, senior China economist at research firm Capital Economics, said in a note sent to Al Jazeera.

The government has rolled out a series of measures this year, including more fiscal spending, tax relief and cuts in lending rates and banks’ reserve requirements to revive the coronavirus-hit economy and support employment.

While the central bank stepped up policy support earlier this year after widespread travel restrictions choked economic activity, it has more recently held off on further easing.

The International Monetary Fund has forecast an expansion of 1.9 percent for China for the full year, the only large economy expected to report growth in 2020.

Premier Li Keqiang warned earlier in October that China needs to make arduous efforts to achieve its full-year economic goals, citing a complex domestic and foreign environment.

Consumption picks up

China’s retail spending has lagged behind the comeback in factory activity as heavy job losses and persistent worries about infections keep consumers at home, even as restrictions lifted.

However, the third quarter saw several signs of a consumption recovery.

In September, auto sales marked a sixth straight month of gains with a solid 12.8 percent expansion. Ford Motor Co’s China vehicle sales jumped 25 percent in the September quarter from a year earlier.

Domestic passenger flights in September, meanwhile, beat their COVID-19 levels, indicating that the sector was approaching a full recovery.

The coronavirus pandemic, which caused China’s first contraction since at least 1992 in the first quarter, is now largely under control, although there has been a small resurgence of cases in the eastern province of Shandong.