Solid quarterly growth. In the September quarter the economy grew by 2.2 per cent, above the consensus estimate of 1.8 per cent.

Monthly economic indicators. Retail sales in September were up 14.2 per cent on a year ago (consensus 13.2 per cent); industrial production was up 9.2 per cent (consensus 9.0 per cent); and fixed asset investment over the first nine months of 2012 was up by 20.5 per cent (consensus 20.2 per cent).

The data suggests Chinese authorities will be cautious about further stimulus.

What does it all mean?
Sighs of relief all round. The latest Chinese economic data readings were either in line or slightly above expectations. The good news is that there are no signs of the economy stalling. And for Australia and the world economy generally, that is a very positive development.

For some, the bad news is that growth rates for spending, production and investment were all above forecast, suggesting to the Chinese authorities that there isn’t urgency about providing more stimulus to the economy.
The latest data is further confirmation that Chinese authorities have achieved the fabled ‘soft landing’ for the economy. Inflation is contained and activity is starting to lift again, rather than weaken.

What do the figures show?
The Chinese economy grew at a 7.4 per cent annual rate in the September quarter (consensus 7.4 per cent), down from the 7.6 per cent annual rate in the previous quarter. For the September quarter GDP grew by 2.2 per cent after rising by 1.8 per cent in the March and June quarters.

Economists had tipped 1.8 per cent quarterly growth. Industrial output expanded at a 9.2 per cent annual pace in September, up from 8.9 per cent in August and above forecasts centred on a result near 9.0 per cent. Production growth appears to have bottomed and may lift modestly over the next few months.

China’s urban fixed asset investment, such as spending on roads and power plants, grew at a 20.5 per cent in 2012 to date (January – September), above forecasts (20.2 per cent) and up from 20.2 per cent in the eight months to August.
Retail sales grew at a 14.2 per cent annual rate in September (forecast 13.2 per cent), up from 13.2 per cent in the year to August and up from 13.1 per cent in the year to July.

What is the importance of the economic data?
China’s National Bureau of Statistics releases its monthly economic statistics around the 10th of each month. Quarterly GDP data is released around the 16th of January, April, July and October. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

What are the implications for interest rates and investors?
The Reserve Bank would be comforted by the latest Chinese economic data. And, on balance, the results mean that the Reserve Bank may be more tempted to stay on the interest rate sidelines in November. We are still pencilling in a rate cut, but it is by no means a lay-down misere.

Consider the fact that US housing activity is strengthening; Europe appears to be stabilising; China’s economy is still humming along; and domestic confidence levels are rising. Confidence has been the missing ingredient. If Aussie confidence levels lift, then the Reserve Bank will be very reticent about cutting rate again.

Today’s Chinese economic data will serve to support the Aussie dollar near US103-105 cents. Good news for consumers, bad news for a raft of businesses.

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