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China's bleak economic data exposes trade war scars

As consumer sentiment darkens, pace of expansion at 15-year low

BEIJING/HONG KONG -- The Chinese economy is showing clear signs of slowing down. November retail sales announced on Friday marked the lowest growth rate in more than a decade and a half, and growth in industrial output also fell to the weakest in years.

With consumers and business owners increasingly concerned about the fallout from the Sino-American trade war, the Chinese leadership is expected to tap such growth-friendly measures as tax cuts when setting its 2019 economic policy in the coming weeks.

Total retail sales -- including sales at department stores, supermarkets and e-commerce sites -- rose 8.1% in November from a year earlier, according to figures from China's National Bureau of Statistics. That fell short of market forecasts and was down from 8.6% growth in October. November's growth was the slowest since May 2003.

Car sales declined, as did sales of smartphones and other communication devices. A November slowdown is especially noteworthy because that month includes the Nov. 11 discount bonanza of Singles Day, the largest online shopping event in the world.

The National Bureau of Statistics had blamed October's slower growth on consumers holding back ahead of Singles Day.

Li Xiang, a businesswoman from northern China's Hebei Province, said sales were slow in her hometown.

A few years ago, she said, "Jewelry shops here were always jam-packed at the year-end because people were buying gifts for each other. But this year, whenever I passed by, I saw few customers inside. In fact, one jewelry shop near my home just went out of business," Li said. She stopped buying jewelry herself a while ago.

Other statistics released Friday added to concerns about the economy.

In manufacturing, auto production fell about 17% in November as sales dropped. Production of industrial robots, metalworking machine tools and ethylene, all subject to additional U.S. tariffs, fell lower on the year.

Overall industrial production missed forecasts by rising 5.4% on the year in November, slowing from the 5.9% increase of October. The comparison versus last year looked especially bleak, given the many factories that were shut down last winter to reduce pollution.

Fixed-asset investment, a measure of private and public spending, including factory and condominium construction, rose 5.9% on the year in the January to November period, up from 5.7% for January to October. Real estate investment was firm, while manufacturers increased their spending on plant and equipment.

"Looking ahead, investment growth may still face downward pressure, while uncertainty will likely remain on retail sales growth," Citibank said in a research note.

Economists expect a slowdown in China's economic growth in 2019, with many forecasting gross domestic product to expand 6.2%, versus an expected 6.5% to 6.6% this year.

Goldman Sachs is among those that have pegged GDP growth at 6.2% for next year. In a recent report, the U.S. investment bank said it expects the Chinese government to lower its growth target modestly to 6% to 6.5%. Goldman said that while Chinese policymakers are likely to accept a "mild deceleration" in economic growth for 2019, it does not expect Beijing to tolerate a growth rate of 6% or lower.

Ting Lu, chief China economist at Nomura in Hong Kong, is slightly more cautious than Goldman and many other economists, forecasting GDP growth of 6.0% next year. "We believe that growth will continue slowing this quarter and in the first half of next year, and most likely it will reach the bottom in the second or third quarter of next year" before moderating, he said at a media briefing on Monday.

Lu said he expects the government to introduce a more aggressive fiscal policy and deregulation of the property market around midyear to help stimulate the economy.

Ben May, director of global macro research at Oxford Economics, in a report published Monday, said: "In China, weakening survey indicators have raised concerns in some camps of a repeat of the 2015-16 soft patch or perhaps worse," adding that Oxford Economics' prediction of 6.1% growth next year is at the low end of consensus forecasts.

"However, it is worth emphasizing that our forecast still implies a modest recovery in growth versus [the fourth quarter of] 2018, as the effects of the recent and prospective stimulus measures come through."

The government is expected to try to maintain moderate economic growth next year. On Thursday, the Politburo, the Communist Party's top decision-making body, said: "We will promote steady growth, promote reform, adjust [the] structure, benefit people's livelihood, prevent risks in a coordinated way, and keep economic operation in a reasonable range," according to a report by state-owned news agency Xinhua.

Nikkei deputy editor Dean Napolitano and Nikkei staff writer Wataru Suzuki contributed to this story

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