• Bloomberg

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China’s economic recovery strengthened in October, with consumer spending picking up steadily and industrial production and investment rising faster than expected.

Industrial output rose 6.9% in October from a year earlier, versus a median estimate for a 6.7% increase, the National Bureau of Statistics said Monday. Retail sales growth accelerated to 4.3% from 3.3% in September, though missing expectations for a 5% increase.

The data shows China’s recovery is well on track, supported by stimulus policies, strong export demand and the nation’s success in containing the spread of the coronavirus. The People’s Bank of China on Monday injected more liquidity into the financial system, helping to maintain the economic recovery.

Consumer spending is catching up after a slow start, complementing the industrial-led recovery. Retail spending received a boost from the Golden Week holiday last month, though many shoppers also delayed purchases to take advantage of the Singles’ Day shopping festival earlier this month. In the first 10 months of the year, retail sales were still down 5.9% from the same period in 2019.

The recovery continued to broaden out in October and growth is expected to accelerate in the fourth quarter, Fu Linghui, a spokesman for the National Bureau of Statistics, told reporters in Beijing. Catering revenue rose 0.8% from a year ago, the first increase this year.

Larry Hu, head of China economics at Macquarie Bank Ltd. in Hong Kong, said he expects growth to pick up to 5.5% in the fourth quarter from 4.9% in the previous three months.

“The strong part of the economy (industry, investment and exports) remains strong but is also around the peak,” he said. “The weak part (consumption and capital expenditure) is catching up.”

“Looking ahead, growth is expected to stay robust through year-end and into the first few months of 2021,” said Chang Shu, chief Asia economist at Bloomberg Economics. “The recovery in consumption and exports should continue. Against this backdrop, we don’t see a compelling case now for further general easing in monetary policy — either a cut in interest rates or reserve requirements — this year.”

Central bank officials have recently raised the issue of withdrawing stimulus, although they have said any adjustment shouldn’t be rushed. The liquidity injection on Monday came as concerns over tighter cash supply sent China’s benchmark sovereign yield to a one-year high last week. Adding to the stress was also the default of a coal miner, triggering worries over the health of state-owned firms and their lenders.

“China continues to move closer to its potential growth,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group. “As the growth outlook remains positive, the authorities will prioritize reforms over stimulus.”

While market reaction to the data was relatively muted, copper prices spiked toward $7,200 on evidence of stronger economic growth.

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