China September and Q3 macroeconomic data outlook: Nomura expects only a limited China growth rebound in Q3 as exports offset weak domestic demand

Overview

This monthly preview assesses China’s September activity indicators and Q3 growth. Nomura expects exports, seasonality and modest policy support to produce a contained improvement, but argues that domestic demand remains too weak for a meaningful broad-based recovery.

Core views

Nomura maintains a 4.3% year-on-year forecast for Q3 real GDP growth, below consensus of 4.5%, and expects only a limited rebound from Q2. Its supply-side assessment is relatively steadier: industrial-production growth rose to 4.9% year-on-year in July-August from 4.6% in Q2 and is forecast at 5.0% for Q3, while services-output growth slowed to 4.2% from 4.5% and is expected to remain at 4.2%. Given the industrial and services sectors’ respective 30% and 58% weights in GDP, Nomura expects official GDP growth to be roughly unchanged from Q2. It notes that China’s GDP calculation is primarily production-side based, so the official figure may align more closely with supply indicators than with weaker expenditure data. The demand picture remains imbalanced. July-August average nominal retail-sales growth improved only slightly to 0.5% year-on-year from 0.2% in Q2, while fixed-asset-investment growth deteriorated to -11.7% from -9.7%. In contrast, USD export growth accelerated to 24.4% from 20.1%. Nomura forecasts Q3 nominal growth of 0.7% for retail sales, -10.8% for fixed-asset investment and 25.5% for exports. For September, it forecasts export growth of 27.7% year-on-year, industrial-production growth of 5.4%, retail-sales growth of 1.1% and fixed-asset-investment growth of -9.2%. Strong container throughput, Korea’s imports from China and export-oriented PMI momentum support the export view, including continued benefit from the global AI supercycle. Nomura expects modest PMI improvement largely from seasonal effects and policy support rather than a firm domestic recovery. Official manufacturing PMI is forecast at 50.0 in September versus 49.8 in August, official non-manufacturing PMI at 49.2 versus 49.0, and RatingDog manufacturing PMI at 51.7 versus 51.5. The latter is supported by export momentum among SMEs and coastal exporters. However, Nomura sees consumer sentiment as highly subdued; passenger-car retail-sales volume growth is estimated at around -23% year-on-year, and autos are expected to remain the main drag on retail sales after the trade-in programme was scaled back and the EV purchase tax rose to 5% from January 2026. Investment and property remain major constraints. Although September fixed-asset-investment growth is forecast to improve from -10.6% to -9.2%, Nomura sees no material recovery because actual fiscal spending is likely to lag government-bond issuance, limiting infrastructure support. It identifies faster deployment of RMB800bn in new policy-based financial instruments, particularly projects linked to the "Six Networks" initiative, as a more constructive development. Property investment is expected to remain in deep contraction at -25.0% year-on-year, only marginally better than August’s -25.4%. High-frequency home-sales data improved in some city tiers, but the Iceberg leading indicator of low listing prices fell 0.7% month-on-month, worse than August’s 0.5% decline. Inflation is expected to rise mainly because of imported and external price pressures, not a genuine revival in domestic demand. Nomura forecasts September CPI inflation at 0.9% year-on-year and PPI inflation at 4.3%, up from 0.8% and 3.8% in August. Higher oil and chip prices are central drivers: gasoline-price increases could add 0.16 percentage points to month-on-month CPI, while higher oil prices, elevated metal prices and chip-price gains support PPI components. Nomura expects Q3 average CPI and PPI inflation of 0.7% and 3.9%, respectively, leaving the GDP deflator broadly steady near Q2’s 1.6% year-on-year. Credit conditions are expected to soften further despite stronger government-bond financing. Outstanding aggregate-financing growth is forecast to ease to 7.1% year-on-year from 7.2%, and outstanding RMB loan growth to 4.8% from 4.9%. Nomura forecasts new aggregate financing of RMB3,361bn and new RMB loans of RMB1,118bn, both below year-earlier levels. Government-bond financing had risen to RMB1,566bn month-to-date as of 28 September, but net corporate-bond financing was -RMB38bn and LGFV financing was -RMB100bn. Liquidity was broadly stable, with average DR007 at 1.40%, while the average 10-year China government-bond yield fell to 1.683% from 1.699%. Nomura expects Beijing to accelerate spending, policy-bank lending and central-bank lending after the State Council called for greater efforts to meet the 4.5-5.0% annual growth target. Yet it expects the policy package to remain modest because exports are strong and room for conventional stimulus is limited. The report argues that more sophisticated planning and structural reforms to public finance and social security are needed to address the underlying weakness.

Analysis framework

Nomura assesses Q3 GDP through supply- and demand-side indicators for July-August plus September forecasts, then cross-checks these views against high-frequency trade, production, prices, property, fiscal-financing and credit data.

Methodology notes

• Industry AnalysisSupply-demand framework

  Supply- and demand-side assessment of GDP growth

  The report compares industrial and services output with consumption, investment and exports to judge Q3 growth and explains why production-side indicators may carry greater weight in the official GDP outcome.

• Industry AnalysisVolume-price decomposition

  Inflation decomposition by oil, metals, chips and food-related price movements

  Nomura uses component price changes and basket weights to explain why headline CPI and PPI may rise even while underlying domestic demand remains weak.

Key data

• Q3 real GDP growth forecast4.3% y-o-yBelow consensus of 4.5%; expected to be broadly unchanged from Q2.
• September export growth forecast27.7% y-o-yUp from 25.0% in August.
• September retail-sales growth forecast1.1% y-o-yUp from 0.4% in August but still weak.
• September fixed-asset-investment growth forecast-9.2% y-o-yImproves from -10.6% in August; year-to-date growth is forecast at -7.5%.
• September property-investment growth forecast-25.0% y-o-yLittle changed from -25.4% in August.
• September CPI and PPI forecasts0.9% y-o-y and 4.3% y-o-yHigher oil and chip prices are expected to drive the increases.
• Outstanding aggregate-financing growth forecast7.1% y-o-yDown from 7.2% in August.

Impact & implications

The report portrays an economy supported by export demand, seasonal effects and limited policy acceleration, but still constrained by weak household demand, investment, property activity and slowing credit. It argues that the rise in headline inflation largely reflects external cost pressures rather than stronger domestic demand.

Risks

• Domestic demand may remain weaker than expected, particularly consumption, auto sales, investment and construction activity.
• Actual fiscal spending may continue to lag financing issuance, limiting the effect of policy support on infrastructure investment.
• The property downturn may persist despite improving high-frequency transaction data.
• A weakening in export momentum would remove a key support for activity.

What to watch

• September releases for PMIs, industrial production, retail sales, fixed-asset investment, trade, inflation and credit.
• Deployment of RMB800bn in new policy-based financial instruments and the pace of fiscal spending.
• Property sales, listing-price indicators and the depth of property-investment contraction.
• The fifth plenary session in late October, the PBoC’s Q3 monetary policy report in mid-November and the Central Economic Work Conference in mid-December.