China’s November data dump is upon us and shows an improving economy moving into the fourth quarter. We’ll begin with inflation. China’s CPI inflation increased slightly in November. Headline CPI inflation rose to 2.0% yoy from 1.7% yoy in October, slightly lower than consensus estimate of 2.1% yoy. On a month-on-month basis, CPI increased by 0.1% compared to the previous month, up from -0.1% in October.
Looking into different components, inflationary pressure remains minimal for non-food items, which rose 1.6% yoy, or flat on a month-on-month basis, while food prices rose 3.0% yoy, or 0.1% on a month-on-month basis.
Meanwhile, the producer price index (PPI) fell 2.2% yoy in November, lower than consensus estimate of -2.0% yoy. On a month-on-month basis, PPI fell 0.1%, down from +0.2% rise in October.
These are consistent with our view that there should be very little inflationary pressure in non-food items after years of over-investment in productive capacity, while food prices inflation remain relatively stable for the moment.
Industrial production was also a little better than consensus. Growth of industrial production accelerated from 9.6% yoy to 10.1% yoy, better than consensus estimate of 9.8% yoy. On a seasonally adjusted month-on-month basis, industrial production rose 0.86% in November, up from the revised 0.83% rise in October.
The closely watched growth in electricity output continued to accelerate from 6.4% yoy to 7.9% yoy after staying in low single-digit rate for two consecutive quarters, suggesting a continued improvement in economic activity into the fourth quarter.
Retails beat as well. Total retail sales rose 14.9% yoy in nominal term, or 13.6% yoy in real term, up from 14.2% yoy in nominal terms in October, or 13.5% yoy in real term. This is better than consensus estimate of 14.6% yoy.
On a seasonally adjusted month-on-month basis, growth picked up from the revised 1.35% in October to 1.47% in November.
On the other hand, China’s fixed asset investment year-to-date growth remains unchanged. Year-on-year growth of fixed asset investment for January to November remains at 20.7%, same as that for January to October, and slightly below consensus estimate of 20.8% yoy. For November alone, however, growth slowed slightly from 22.4% yoy in October to 20.0% yoy in November.
Infrastructure and related fixed asset investment continued to be the biggest driver of fixed asset investment growth in November, while growth in investment in manufacturing sector remains relatively weak. On a non-accumulative basis (i.e. comparing November this year with November last year), total infrastructure investment rose 41.9% yoy, up from 25.5% yoy in October, while investment in manufacturing sector continued to slow from 19.7% yoy to 19.4% yoy based on our calculations.
Meanwhile, in a separate release, year-to-date year-on-year growth in real estate investment picked up from 15.4% in October to 16.7%.
That leaves our rebalancing comparison chart (between retail sales and fixed-asset investment) with a small improvement on the month: