China’s Retail Sales Accelerate as Factory Output Slows

China’s retail sales unexpectedly accelerated in November while industrial output rose less than estimated, giving a mixed picture of growth as leaders gather in Beijing to set economic policies for the coming year.

Factory production rose 10 percent from a year earlier, the National Bureau of Statistics said in Beijing yesterday, compared with analysts’ median projection of 10.1 percent in a Bloomberg survey. Retail sales advanced 13.7 percent and fixed-asset investment excluding rural households showed a slowdown.

Economists were split in interpreting the data, with Barclays Plc saying the nation’s rebound appeared to have “run its course,” while Bank of America Corp. said that fourth-quarter growth could be stronger than anticipated. Central bank data on loans, credit and money supply due as soon as today will be the final key readings for November.

“A modest slowdown in investment and industrial production may lead to a little softening of growth in the coming months,” said Gao Shanwen, Beijing-based chief economist with Essence Securities, a Chinese government-backed brokerage. At the same time, the indicators show China’s economy is generally stable, he said.

Fixed-asset investment grew 19.9 percent in the first 11 months of the year, less than estimated. The value of property sales rose 30.7 percent in the January-November period, yesterday’s data showed.

The Shanghai Composite Index fell 1 percent at 10:24 a.m. local time, as investors speculate on the outlook for tapering of U.S. Federal Reserve stimulus and the meeting of Chinese policy makers.

Auto Sales

China’s passenger-vehicle sales rose 16 percent in November as Japanese automakers extended their recovery, a separate report yesterday from the state-backed China Association of Automobile Manufacturers showed.

Estimates for industrial-production growth ranged from 9.6 percent to 10.5 percent, following a 10.3 percent gain in October. Retail sales were forecast to rise 13.2 percent, after a 13.3 percent pace in the previous month. The median estimate was 20 percent for fixed-asset investment expansion in the first 11 months of the year.

Online-shopping discounts associated with “Singles’ Day” on Nov. 11 helped fuel retail sales, producing a “crazy sales figure” of 35 billion yuan ($5.8 billion) on Alibaba Group Holding Ltd.’s Taobao and Tmall platforms, almost double a year earlier, Haitong International Securities Group Ltd. said in a note.

China’s economy expanded 7.8 percent in the third quarter from a year earlier, rebounding from a slowdown in the two preceding periods. Analysts surveyed by Bloomberg News last month see growth easing to 7.6 percent this quarter and 7.5 percent in 2014, based on median estimates.

Growth Target

Leaders yesterday opened their annual central economic work conference to set goals and policies for 2014, according to the official Xinhua News Agency. While the growth target may be decided at the meeting and reported in Chinese media afterward, it won’t be officially announced until the National People’s Congress meets in March, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a report.

This year’s goal is 7.5 percent expansion, and the key issue is whether to maintain that target in 2014 or set it at 7 percent, Zhang said.

Customs data released Dec. 8 showed China’s trade balance had the largest surplus in more than four years as exports rose 12.7 percent from a year earlier and imports gained 5.3 percent.

While the increase in exports topped projections from 41 of 42 analysts surveyed by Bloomberg News, the data triggered speculation among some analysts that capital flows disguised as trade could be boosting the export numbers, a practice that authorities tried to crack down on in May.

Export Gains

Yesterday’s data show the previously reported export growth was inflated because the industrial-production figures indicate goods for export advanced only 5.8 percent, Zhang said.

China’s foreign-exchange regulator said Dec. 7 that it will boost scrutiny of trade financing and that banks should prevent companies from getting financing based on fabricated trade. The measures are aimed at preventing abnormal foreign-exchange flows, the State Administration of Foreign Exchange said in a statement posted on its website Dec. 7 and dated Dec. 6.

Other previously released data showed an official gauge of manufacturing purchasing managers in November was unchanged from October, while a private index from HSBC Holdings Plc and Markit Economics fell.

While retail sales suggest “improved consumption,” a broader look at the data points to a slowing economy, Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole CIB, said in a note.

Different Take

Bank of America had a different interpretation of yesterday’s figures, saying economic growth this quarter is “very likely” to exceed the bank’s 7.7 percent forecast. The slowdown in industrial production gains resulted from a comparison with a “strong rebound” at the end of last year, economists led by Lu Ting in Hong Kong wrote in a report.

China’s gross domestic product is expected to rise 7.5 percent in 2014, the Chinese Academy of Social Sciences, a government researcher, said in an annual forecast yesterday in Beijing. Retail sales will rise 13.1 percent in 2014, the organization said.

— With assistance by Xin Zhou

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