Looking Beyond The Soft Patch In October
All key economic indicators for October came in below market expectations and were also lower than September’s data. The softer data fuelled market expectations of further reflationary policies, but we beg to differ. Measures announced since end-1H22 have been meaningful and the easing of pandemic control measures would help kick-start a growth rebound. We expect better economic data by 1Q23.
- Retail sales fell 0.5% yoy, coming in below market expectation of 0.7% yoy and September’s 2.5% yoy. The increase in pandemic control-related lockdowns during the period hampered the recovery in retail activities. Retail sales of goods were up 0.5% yoy, but food and catering sales were down 8.1% yoy. Equally weak were sales of semi-durable and durables as sales of apparel and household appliances declined 7.5% yoy and 14.1% yoy respectively, a reflection of rather low consumer confidence at the moment.
- 10M22 FAI growth at 5.8% yoy ytd, implying that FAI growth has fallen to 4.9% yoy in October, compared with 6.7% yoy in September. The key drag was real estate-related FAI which fell 16.0% yoy compared with a 12.8% yoy drop the month before.
- 18.7% yoy rise in automobile production supported a 5.0% yoy rise in industrial production. Production of electrical equipment and ferrous metal processing were the other bright spots, up 16.3% yoy and 10.2% yoy respectively. The weakest link was production of textiles, down 4.2% yoy
- Expect better data by 1Q23. Although the softer data has led to market expectations that additional reflationary policies will be introduced, we opine that the supportive policies introduced since end-1H22 and easing of pandemic control measures would be sufficient to kick-start a growth rebound. We expect better economic data by 1Q23.