China's Faltering Economic Growth Data Highlight Struggling Consumer and Weakening Labor Market

Li Chen
16 Sep, 2024
Hong Kong

Stocks in Hong Kong struggled in Monday's trading as investors reviewed the latest flood of economic updates from the mainland. 

The Hang Seng index declined as much as 0.5% in Monday's trading after the key economic data fell short of market expectations, setting off alarms of rapidly faltering economic activities. 

China's retail sales in August rose 2.1%, industrial output advanced at a five-year low annual rate of 4.5%, fixed investment slowed at 3.4%, and foreign direct investment plunged 31.5% to $81.8 billion in the period between January and August, respectively. 

Retail sales slowed from 2.7% in the previous month, and fixed investment in the eight-month period to August slowed to 3.4% from the first seven months in the year, the National Bureau of Statistics reported over the weekend. 

Property investment dropped 10.2% in the eight-month period to August, matching the decline in the seven-month period ending in July. 

Industrial output growth slowed to 4.5% from a 5.1% increase in July, as domestic demand growth continues to wane. 

The urban jobless growth rate edged higher to 5.3% in August from 5.2% in July, but the jobless data are widely suspected to understate by a wide margin the weakness in the labor market. 

China's weak growth data confirmed the uneven economic recovery and the government's flexibility to stimulate the economy because of sky-high debt levels at the federal and local government levels. 

Moreover, new home prices across 70 cities declined 5.7% in August, faster than 5.3% in July, according to the latest data released by the National Bureau of Statistics. 

New home prices fell at the fastest pace since May 2015 as the federal government's piecemeal approach to reviving weak property markets failed. 

Prices in Tier-1 cities, which generally act as a barometer of a nation's health, declined 0.3% from the previous month, reversing a trend of rising prices for years. 

Moreover, prices declined 0.7% in the Tier-2 and Tier-3 cities, amid a lack of demand and a string of failed and unfinished residential investment projects. 

Existing home sales did not fare any better, and prices plunged 0.9% across the top 70 cities, the statistics bureau reported over the weekend.

China's households are increasingly parking their savings in banks amid weak consumer confidence and a rapidly weakening labor market outlook. 

China's retail bank deposits increased by 9.65 trillion yuan in the eight months to August, with 710 billion yuan rising in August alone, the People's Bank of China reported on Friday. 

 

China Stock Movers 

The Hang Seng index decreased 0.04% to 17,362.17, and financial markets on the mainland were closed for the celebration of the Mid-Autumn festival. 

Residential property developers extended recent losses after the release of new home price data over the weekend. 

China Resources Land decreased 2.7% to HK $19.04, China Vanke decreased 2.5% to HK $3.83, Longfor Group Holdings dropped 2.6% to HK $7.81, but Sun Hung Kai Properties rose 1.1% to HK $78.70. 

Tech stocks lacked direction and headed lower in Monday's trading. 

Alibaba Group fell 1.03% to HK $81.90, Tencent Holdings gained 0.7% to HK $377.60, and Baidu added 0.7% to HK $82.65.