China's November Financial Institution Loan Growth Hits Lowest Pace in Nearly 23 Years

By TrendForce

2024-12-17

China financial institution loans growth fell to its lowest level in nearly 23 years in November, highlighting the limited impact of stimulus measures introduced since September and the continued weakness in consumer and business confidence.

Read more at Datatrack

In term of monetary supply, broad money (M2) grew 7.1% year-on-year in November, down 0.4 percentage points from the prior period. Meanwhile, narrow money (M1) contracted 3.7%, though it improved by 2.4 percentage points, marking the second consecutive month of recovery.

The M1-M2 gap narrowed further to -10.8%, suggesting slight improvement in financing demand from consumers and businesses, though overall demand remains insufficient.

Read more at Datatrack

Since September, the Chinese government has implemented a series of stimulus measures, including "trade-in" programs to boost automobile and home appliance consumption, as well as strengthened support for high-tech manufacturing. However, the latest monthly economic data suggest that domestic demand recovery remains limited.

On the consumption front, retail sales grew 3.0% year-on-year in November (down from 4.8% previously), falling well short of the 5% market expectation. Sales of non-essential goods, such as apparel, jewelry, and cosmetics, remained weak. While the sharp decline in growth was partially attributed to the "Double 11" shopping festival being brought forward to October, the growth rate still underperformed September’s 3.2%.

Read more at Datatrack

In terms of investment and production, fixed asset investment grew 3.3% cumulatively (down from 3.4%). Manufacturing investment remained stable at 9.3% year-to-date, supported by government policies targeting high-tech sectors. Industrial production maintained growth at 5.4%.

However, the property sector showed no significant improvement, with cumulative real estate investment contracting by 10.4%, a 0.1 percentage point decline from the previous period. Infrastructure investment also slipped by 0.1 percentage points to 4.2%.

Read more at Datatrack

Overall, November's financial and economic data reaffirm that China’s stimulus measures since September have struggled to boost market confidence and consumption demand effectively. Sluggish loan growth, weak retail sales, and decelerating investment underscore the limited transmission of policies to the real economy, with domestic demand recovery remaining fragile.

In light of insufficient domestic demand and weakened confidence, the Chinese government may need to further expand monetary easing and adopt more proactive fiscal measures. This includes ensuring more effective capital flows into the real economy, stimulating domestic demand, and providing stronger support for economic growth in 2025.

2024-12-16

China's Retail Sales Weaken Unexpectedly in November, Prompting Urgent Policy Stimulus

China's retail sales in November showed an unexpected slowdown, with growth falling significantly short of market expectations, highlighting the pressing need for the Chinese government to strengthen measures aimed at boosting consumption. China's retail sales grew by 3.0% year-on-year in November, a decline of 1.6 percentage points from the previous month, according to data released by the National Bureau of Statistics (NBS) on December 16, falling well below market expectations of 5.0%. The slower growth primarily reflects declines in the sales of non-essential goods, including apparel, jewelry, beverages, and tobacco. Among these, cosmetics sales saw a sharp contraction, with annual growth plummeting to -26.4% from 40.1% in the prior period. In contrast, automobiles (6.6%) and household appliances (22.2%), supported by the "trade-in" policy, continued to grow. Excluding automobile sales, retail sales of other consumer goods grew by only 2.5%, down 2.4 percentage points from the prior month, indicating that consumer spending and confidence have not broadly recovered despite stimulus measures. Read more at Datatrack In terms of industrial production, China's industrial output grew by 5.4% year-on-year in November, slightly exceeding the previous month and market expectations of 5.3%, reflecting continued support for high-tech manufacturing. However, the growth in industrial production outpaced retail sales, highlighting persistent domestic oversupply issues. Read more at Datatrack In recent years, China has typically relied on exports to alleviate oversupply and drive economic growth. However, with Donald Trump set to assume the U.S. presidency, the export-driven growth model—accounting for 20–30% of GDP growth—may face challenges, necessitating a faster pivot toward domestic consumption as the primary growth driver. Last week, the Central Economic Work Conference revealed significant adjustments to China's economic priorities for the coming year. For the first time, consumer demand was elevated to the top priority among the nine key tasks (previously ranked second for the past two years). In monetary policy, the government reintroduced terms like "moderate easing" the first such language since 2014 and pledged to "adjust reserve requirement ratios and interest rates at appropriate times". Fiscal policy is also set to become more proactive, with explicit mentions of "raising the deficit ratio" and "moderately increasing central budgetary investment." While these announcements reflect the government's determination to improve economic growth and domestic demand in 2024, the communiqué lacked specifics on the scale and implementation of these measures, leading to a muted market reaction.

2024-12-18

U.S. November Retail Sales Beat Expectations, Market Delays Fed Rate Cut Expectations Again

The U.S. retail sales exceeded market expectations in November, demonstrating the resilience of U.S. consumer spending. This has led the market to further postpone its expectations for the Federal Reserve (Fed) to lower interest rates next year. The U.S retail sales grew by 3.8% year-on-year (prior: 2.9%) and 0.7% month-on-month (prior 0.5%) in November, according to U.S. Census Bureau on December 17, both outperforming market forecasts of 3.6% and 0.6%, respectively. Among 13 major retail categories, seven showed growth, with the increase primarily driven by automotive-related sales and e-commerce: Automotive-related sales: Up 6.5% year-on-year (previously 3.7%) and 2.6% month-on-month (previously 1.8%). This reflects promotional discounts from car dealerships that spurred purchases. Additionally, vehicle damage caused by October's hurricanes and concerns about potential tariffs under Trump’s policies may have further boosted sales. E-commerce sales: Up 9.8% year-on-year (previously 6.9%) and 1.8% month-on-month (previously 0.1%). This growth was largely driven by Thanksgiving and Black Friday promotions. However, it may also indicate that some consumers, constrained by limited purchasing power, shifted toward discounted goods. This aligns with a decline in food services and bar sales, which fell 0.4% month-on-month (previously up 0.9%). Excluding automotive and gasoline station sales, core retail sales grew 3.9% year-on-year (previously 3.8%) and 0.2% month-on-month (unchanged). Further excluding food services and building materials, control group core retail sales increased 4.3% year-on-year (previously 3.7%) and 0.4% month-on-month (previously down 0.1%). Read more at Datatrack Overall, while e-commerce and dining-out data may suggest weakening spending capacity, particularly among lower-income groups, consumer spending as a whole remains resilient. It continues to provide strong support for fourth-quarter GDP growth. The latest forecast from the Atlanta Fed projects U.S. real GDP growth of 3.1% in Q4, up 0.3 percentage points from Q3. Later today, the Federal Reserve is set to announce its final rate decision and Summary of Economic Projections for the year. While strong consumer growth persists, downside risks in the labor market remain. The market expects the Fed to cut rates by 25 basis points in December but anticipates a slower pace of rate cuts in 2025. According to FedWatch, the Fed is now expected to cut rates by 25 basis points in March and October 2025 (previously March and June). (Fed Rate Cut Expection in 2025, Source: CME FedWatch Tool)

Hashtags

China

Market Spotlight