China monthly macroeconomic data preview: Nomura expects China’s Q3 growth rebound to remain limited despite stronger exports and seasonal support

Overview

This monthly China data preview argues that September activity should improve modestly on seasonality, robust exports and increased policy efforts, but the improvement will not resolve weak domestic demand. Nomura maintains its 4.3% y-o-y Q3 GDP forecast and expects policy support to remain modest in scale and economic impact.

Core views

Nomura expects a limited improvement in September activity, driven mainly by favorable seasonal patterns, strong exports and stepped-up policy support. It maintains a below-consensus forecast for Q3 real GDP growth of 4.3% y-o-y, compared with consensus at 4.5%. The State Council has adopted a more urgent tone toward meeting the 4.5-5.0% annual growth target, and Nomura expects faster spending, policy-bank lending and central-bank lending. However, it judges that the policy package will be modest because exports are already strong and conventional stimulus room is limited. In its view, lasting improvement instead requires cleaning up non-performing debt and more sophisticated reforms to public finance and social security. The supply-side picture supports broadly unchanged Q3 growth. Industrial production growth rose to 4.9% y-o-y in July-August from 4.6% in Q2, while services output growth slowed to 4.2% from 4.5%. Nomura forecasts Q3 industrial and services growth of 5.0% and 4.2%, respectively. Because industry and services account for 30% and 58% of GDP, it expects the production-side measure of GDP to remain close to Q2 and to align with its 4.3% forecast. On the expenditure side, domestic demand remains much weaker: July-August average nominal retail-sales growth improved only to 0.5% y-o-y 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, while noting that official GDP is calculated primarily from the production side. For September, Nomura forecasts the official manufacturing PMI at 50.0, up from 49.8 in August, and the official non-manufacturing PMI at 49.2, up from 49.0. It attributes the manufacturing improvement to seasonal strength and policy support, while the non-manufacturing increase reflects travel bookings ahead of Golden Week. The report cautions that consumer sentiment remains subdued, citing CPCA advance estimates showing passenger-car retail volume growth worsening to -24.6% y-o-y in September from -23.6% in August. Construction may receive some support from fiscal efforts and policy financing, but Nomura does not expect the construction downturn to reverse soon. The export-oriented RatingDog manufacturing PMI is forecast to rise to 51.7 from 51.5, supported by stronger container throughput and Korea’s imports from China amid the global AI upcycle. Exports are expected to remain the principal support. Nomura forecasts export growth of 27.7% y-o-y in September, up from 25.0% in August, and import growth of 24.5%, moderating from 28.2% because of a higher base. It expects higher crude prices to feed into import values following the shipping lag from the Persian Gulf, while rising semiconductor prices, particularly memory-chip prices, should add to import values. The trade surplus is forecast to widen to USD121.1bn from USD119.1bn. High-frequency evidence includes 10.2% y-o-y growth in container throughput at major ports through 27 September, versus -2.0% in August; Korea’s imports from China rising 48.7% through 20 September, versus 32.6%; and the China Import Dry Bulk Freight Index tracking 52.3% y-o-y, versus 40.6% in August. Industrial production growth is forecast to edge up to 5.4% y-o-y from 5.2%, helped by exports and an oil-sector production recovery as crude imports rise. China’s crude imports were running at 7.84mn barrels per day in September, up from 7.25mn in August, though still 25.7% below year-earlier levels. Oil-refinery utilization in Shandong rose to 58.4% at end-September from 56.9% at end-August, and PTA-factory utilization rose to 74.2% from 61.5%. Yet other indicators remained uneven: polyester filament-yarn utilization was 17.7 percentage points below the prior-year level, while rebar output growth fell to -19.7% y-o-y and crude-steel output growth to -7.5%. Nomura expects headline inflation to rise because of imported cost pressures rather than a genuine domestic-demand recovery. CPI inflation is forecast at 0.9% y-o-y in September, up from 0.8%, while sequential CPI inflation is expected to moderate to 0.2% m-o-m from 0.4%. Retail gasoline price increases of RMB260 per tonne on 12 September and RMB395 per tonne on 25 September are estimated to add 0.16 percentage points to headline month-on-month CPI. Food-price data remain soft, including vegetable inflation at -8.2% y-o-y, although pork inflation improved to -16.9% from -20.9%. PPI inflation is forecast to rise to 4.3% y-o-y from 3.8%, led by oil prices. Brent prices rose 27.8% m-o-m in September and 71.4% y-o-y; oil-related industries represent 14.1% of the PPI basket, non-ferrous-related industries 7.3%, and computer, communications and other electronic-equipment manufacturing 12.8%. Nomura forecasts Q3 average CPI and PPI inflation at 0.7% and 3.9%, respectively, implying a GDP deflator similar to Q2’s 1.6% y-o-y. Domestic consumption is expected to remain subdued despite a modest base and holiday-calendar benefit. Retail-sales growth is forecast to improve to 1.1% y-o-y from 0.4%, as the Mid-Autumn Festival fell within September rather than the October National Day break. Nomura expects auto retail sales to contract 19.3% y-o-y, catering to grow 1.7%, and merchandise excluding autos to grow 3.8%. Passenger-car retail volumes are expected to remain around -23% y-o-y, reflecting a scaled-back trade-in programme and the EV purchase-tax increase from zero to 5% effective January 2026. Consumer spending is also constrained by subdued confidence, payback from earlier trade-in support, and higher prices for petroleum-related goods and consumer electronics. Investment and property remain key drags. Fixed-asset-investment growth is forecast to improve only slightly to -9.2% y-o-y from -10.6%, while year-to-date growth is expected to worsen to -7.5% from -7.2%. Nomura sees no material recovery because fiscal spending is likely to lag government-bond issuance, constraining infrastructure investment. It identifies faster deployment of RMB800bn in new policy-based financial instruments, especially projects under the "Six Networks" initiative, as a more positive signal. Property investment is forecast to stay in deep contraction at -25.0% y-o-y, only slightly better than -25.4% in August. Some high-frequency housing-sales measures improved, including existing-home sales volume growth in 18 cities at 15.8% y-o-y through 24 September, but the Iceberg leading housing-price index declined 0.7% m-o-m, worsening from -0.5% in August. Credit conditions are also expected to soften. Outstanding aggregate-financing growth is forecast to ease to 7.1% y-o-y from 7.2%, and outstanding RMB-loan growth to 4.8% from 4.9%. Nomura forecasts RMB3,361bn of new aggregate financing and RMB1,118bn of new RMB loans, both below year-earlier levels of RMB3,530bn and RMB1,290bn. Government net bond financing had reached RMB1,566bn by 28 September, above RMB1,174bn a year earlier, but net corporate bond financing was -RMB38bn versus RMB227bn a year earlier, and LGFV financing was -RMB100bn versus -RMB75bn. Short-term liquidity was stable, with the average DR007 at 1.40%, while the monthly average 10-year Chinese government bond yield declined to 1.683% from 1.699%.

Analysis framework

Nomura evaluates Q3 GDP using July-August supply- and demand-side data plus September forecasts, giving particular weight to production indicators because China’s GDP is calculated primarily from the production side. It combines official and high-frequency indicators for exports, industry, consumption, property, inflation, fiscal activity and credit to explain the expected September outcomes.

Methodology notes

• Industry AnalysisSupply-demand framework

  Supply- and demand-side assessment of GDP growth

  Nomura compares industrial production and services output with retail sales, investment and exports to judge Q3 growth; it expects the production side to carry more weight in the official GDP outcome.

• Industry AnalysisVolume-price decomposition

  Separating price-driven inflation and trade values from underlying demand and volume trends

  The report attributes stronger CPI, PPI and import values largely to oil and chip prices while distinguishing those effects from subdued underlying domestic demand and weak crude-import volumes.

Key data

• Q3 real GDP growth forecast4.3% y-o-yBelow consensus at 4.5%; Nomura expects only a limited rebound from Q2.
• September export growth forecast27.7% y-o-yUp from 25.0% in August, supported by continued export momentum.
• September industrial production growth forecast5.4% y-o-yUp from 5.2% in August, helped by exports and oil-sector activity.
• September retail-sales growth forecast1.1% y-o-yUp from 0.4% in August but still weak on subdued consumer demand.
• September fixed-asset-investment growth forecast-9.2% y-o-yAn improvement from -10.6% in August but still signals weak investment.
• 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-yUp from 0.8% and 3.8%, respectively, mainly because of higher oil and chip prices.
• Outstanding aggregate-financing growth forecast7.1% y-o-yDown from 7.2% in August as corporate bond issuance becomes a drag.

Impact & implications

Nomura’s outlook describes an increasingly imbalanced economy: exports and production provide near-term support, while consumption, investment, property and credit restrain a broader recovery. The report expects higher imported commodity and chip prices to raise headline inflation without signaling a durable revival in domestic demand.

Risks

• Domestic demand could remain weaker than expected as consumer confidence, autos, durable-goods spending and property activity stay under pressure.
• Fiscal spending may continue to lag government-bond issuance, limiting infrastructure and fixed-asset-investment support.
• The construction and property downturn is unlikely to reverse in the near term, according to the report.

What to watch

• September official manufacturing and non-manufacturing PMI releases, forecast at 50.0 and 49.2.
• October releases of September activity, inflation, trade, credit and property data.
• Deployment of RMB800bn in new policy-based financial instruments and the pace of fiscal spending.
• The fifth plenary session of the 20th Central Committee on 26-29 October and the PBoC’s Q3 monetary policy report in mid-November.