China’s real GDP growth falls further in 4Q18, points to grim outlook for 1Q19

China’s real GDP growth fell further to 6.4 percent y/y in 4Q18 from 6.5 percent in 3Q18 as expected. Net export continued to drag the overall performance for the fourth straight quarter in spite of slumping oil price.

This largely mirrored the negative export growth in December after front-loading activities ended. The monthly data pointed to a grim outlook for 1Q19. Retail sales inched up to 8.2 percent y/y in December from 8.1 percent in November, staying at the lowest range since 1999.

Expenditure on most other discretionary goods such as cosmetics, jewellery, and automobile remained weak. Obviously, consumer confidence has been sapped by job insecurity and slower wage growth.

Fading credit impulse on the back of regulation tightening points to further weakness ahead. Infrastructure investment was a bright spot; growth was positive for a second consecutive month (5.7 percent in December vs 2.5 percent in November (3mma)).

The National Development and Reform Commission (NDRC) greenlighted RMB1.2 billion worth of infrastructure projects in 4Q18, the highest in three years.

"We expect the quota of special bond issuance (excluded from official budgets) to increase to RMB2 trillion in 2019 from RMB1.35 trillion last year. Off-budget expansions will likely include the re-launching of special construction fund," DBS Research commented.