Beyond the Headlines: Five Things to Watch in China's GDP Report

Updated on
  • Quarter-on-quarter and nominal figures offer a better picture
  • Income, jobs and sales figures highlight consumers' power

Rapid income growth over the last decade has made Chinese consumers an increasingly powerful force, snapping up Apple iPhones, Tiffany diamonds and Toyota sedans.

Photographer: David Paul Morris/Bloomberg

While Chinese stocks have whipsawed investors, the economy has proved more stable, with growth still forecast to be in line with the government’s target of about 7 percent.

The nation’s fourth quarter and full-year gross domestic product report will be released Tuesday at 10 a.m. in Beijing, or 9 p.m. Monday on Wall Street. Growth in the world’s second-largest economy for the quarter and year were both 6.9 percent, according to a Bloomberg survey of economists as of Monday.

Other data out at the same time may show China’s two-speed economy remained intact in December. Retail sales will be a bright spot with 11.3 percent growth from a year earlier, the best gain in 12 months, while industrial production probably fell to a 6 percent year-over-year growth rate, the projections showed Monday. Fixed-asset investment growth in 2015 was seen as remaining at a 15-year low of 10.2 percent.

The stakes are high, and not just for policy makers’ credibility: Data showing a sharper slowdown may spur more fiscal and monetary stimulus, while a stronger reading may provide a tonic for jittery global markets concerned about China’s outlook. Policy makers have signaled they’ll allow some slowness as they tackle painful tasks like reducing excess capacity, but nothing that could threaten President Xi Jinping’s goal of at least 6.5 percent growth through 2020.

Aside from the headline growth rates, a closer examination of the report will help gauge the health of various facets of the economy.

Price Pressure

By calculating the difference between nominal growth (not adjusted for inflation or deflation), and real growth (which is adjusted), we’ll be able to see the latest on the GDP deflator, which was negative in the first nine months of last year.

Deepening deflation, stemming from a record stretch of more than three years of producer-price declines, would be a negative sign for an economy grappling with slowing profits and rising debts -- both of which are also priced in nominal terms.

Income, Jobs

Rapid income growth over the last decade has made Chinese consumers an increasingly powerful force, snapping up Apple iPhones, Tiffany diamonds and Toyota sedans. Fresh evidence of that ascent will be revealed this week in a section of the GDP report on per capita disposable income.

That number still has room to rise. The national average disposable income per person was 20,167 yuan ($3,272) in 2014, less than a tenth the U.S. level. The level for urban residents was 28,844 yuan, triple the level from a decade earlier. Fresh readings should show further improvements, underpinning one of the economy’s strongest pillars last year -- consumption.

Wang Baoan, the new head of the statistics bureau, may give an update on the health of the labor market at a briefing after the GDP release. Survey-based unemployment, a number Premier Li Keqiang has said he monitors, was at about 5.2 percent in September.

The nation added about 13 million new jobs last year, according to its top economic planning body, topping the target of 10 million, thanks to a booming services sector.

The government also will publish a labor market report around the GDP release date. That will show which sectors are hiring, and the level of job openings across various regions. 

Growth Drivers

On Wednesday, the NBS will publish its breakdown of total economic output, offering a more granular look into which parts of the economy are leading and lagging.

Financial services grew 16 percent in the third quarter from a year earlier, a pace that will be hard to match in the fourth quarter because of a higher base year comparison given the market boom took off in late 2014. NBS will also detail the value-added of agriculture, industries, transportation, accommodation, property and other key industries.

Housing Investment

The golden age is over for property developers, with the real estate market in a third year of downturn. Growth in fixed-asset investment in real estate slowed to 2.8 percent in the first 11 months from a year earlier, compared to a 20 percent jump in the same period two years earlier.

That investment gauge will turn into negative territory this year, according to JPMorgan Chase & Co. and Nomura Holdings Inc. analysts. By contrast, researchers at China’s central bank are more optimistic, forecasting a recovery on brighter sales prospects and price gains in bigger cities, according to a working paper.

Data released Monday showed China’s home-price recovery spread to more cities in December, especially smaller ones, after authorities rolled out easing measures targeting regions with a surplus of unsold homes. New-home prices climbed in 39 cities, compared with 33 in November, among the 70 cities tracked by the government, the National Bureau of Statistics said.

Consumer Cash

Retail sales were robust throughout the year, despite the stock market turmoil and lackluster investment. Online shoppers opened their electronic wallets Nov. 11 to spend a record $14.3 billion in 24 hours during the Singles Day shopping holiday created by Alibaba Group Holding Ltd.

December and full-year retail sales figures will be released Tuesday along with GDP. Tallies will include online sales, which soared 33 percent in the first 11 months.

— With assistance by Xiaoqing Pi

(Updates with final economist forecasts in third paragraph.)
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