Slower property, construction growth drag on China Q3 GDP but services pick up

Slower property, construction growth drag on China Q3 GDP but services pick up

BEIJING: China posted relatively solid economic growth in the third quarter, driven by a stronger services industry, though there were signs of weakness in real estate and construction as property cooling measures start to bite, data has shown.

China’s property sector grew 3.9 percent in the quarter from a year earlier, decelerating from 6.2 percent in the second quarter and the slowest pace in nearly two years, the National Bureau of Statistics said in a more detailed breakdown of third-quarter GDP data issued on Thursday.

Growth in construction activity slowed from 5.4 percent in the second quarter to 4 percent, the weakest expansion since the fourth quarter of 2000, NBS data showed.

Property and construction together account for 13.3 percent of the economy, with property alone directly impacting 40 other industries.

Softening in those sectors appeared to be the main drag on otherwise fairly resilient China data on Thursday. Third-quarter growth eased only slightly to 6.8 percent from 6.9 percent in the previous quarter, as had been widely expected.

Analysts have long predicted a slowdown in the property sector and construction after city governments began rolling out a flurry of measures from late last year to cool soaring home prices and deter speculators.

Property sales dropped for the first time in more than two-and-a-half years in September and housing starts slowed sharply.

China had posted forecast-beating growth in the first half of the year, led by a sharp turnaround in the long-ailing industrial sector, which accounts for a third of the economy.

A construction boom — fueled by the housing frenzy and government infrastructure spending — has spurred demand and prices of building materials, and the resulting return of factory gate inflation has boosted earnings for China’s heavily indebted heavy industry.

But industrial growth slowed to 6.3 percent in the third quarter, from 6.6 percent in the previous period, and there is uncertainty about how “smokestack” industries will fare over the coming months as China implements drastic measures to reduce winter air pollution.

China’s steel output dropped in September from a record high the previous month as mills in the world’s top producer cut production in line with Beijing’s campaign for clearer skies, pointing to further declines as winter curbs kick in.

The services industry took up much of the slack, expanding 8 percent in the third quarter, from 7.6 percent in the second quarter, driven by a pickup in the financial sector and strong expansion in information technology and other areas.

Though “old economy” stalwarts like property and industry have led the way this year, Beijing continues to push for a more balanced economic growth model driven more by consumption and services.

Consumption industries including retail and catering and accommodation posted mostly stable growth of 7.1 percent in the third quarter.- Reuters

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