(Reuters) – China’s third quarter GDP growth was the slowest in a full year. This is due to power supply shortages, bottlenecks, and sporadic COVID-19 epidemics. It also raises concerns about policymakers in light of rising jitters regarding the property sector.

The Monday data revealed that the gross domestic product (GDP), grew at 4.9% in July and September from the previous year, which is the lowest pace since 2020’s third quarter. Also, it was slower than the 7.9% recorded in the second-quarter.

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KEY POINTS

* Q3 GDP +4.9% y/y (f’cast +5.2%, Q2 +7.9%)

* Q3 GDP +0.2% q/q s/adj (f’cast +0.5%, Q2 +1.2% revised)

* September industrial output +3.1% y/y (f’cast +4.5%, Aug +5.3%)

* September retail sales +4.4% y/y (f’cast +3.3%, Aug +2.5%)

* Jan-Sept fixed asset investment +7.3% y/y (f’cast +7.9%, Jan-Aug +8.9%)

COMMENTARY

KEN CHEUNG CHIEF ASIAN FX STRATEGIST MIZUHO BANK HONG KONG

The PBOC has downplayed its easing bias on the monetary policy front and will likely implement targeted easing to replace Q4’s broad RRR reduction. The increasing risk of China growth in the fourth quarter should dent sentiment. However, we anticipate the CNY falling back to 6.50 year-end.

LOUIS KUIJS, HEAD OF ASIA ECONOMICS, OXFORD ECONOMICS, HONG KONG

“We believe the problems of production cuts and electricity shortages will diminish in Q4. We expect that senior policymakers will start to stress growth, and they will call for a slower pace in pursuit of climate goals.

Although we do not expect Evergrande to have a Lehman moment due to Evergrande’s issues, we feel that the impending real estate downturn and lingering COVID concern will continue to weigh on growth. Therefore, our Q4 GDP forecast is only 3.6% y/y.

“In light of the disappointing growth we anticipate in the coming months we believe policymakers will take further steps to boost growth including increasing liquidity in interbank markets and infrastructure development. We also think they’ll relax some aspects credit and real property policies.

THE BASKGROUND

* China’s economy has rebounded from the pandemic but the recovery is losing steam, weighed by faltering factory activity, persistently soft consumption and a slowing property sector.

* Signs of further slowing in the economy put pressure on the central bank to ease policy, but analysts said concerns over debt and property bubble risks may delay any meaningful steps.

* Global worries about a possible spillover of credit risk from China’s property sector into the broader economy have intensified as major developer China Evergrande Group wrestles with more than $300 billion of debt.

* Chinese Premier Li Keqiang has said China has ample tools to cope with economic challenges despite slowing growth, and the government is confident of achieving full-year development goals.

* China’s economy is “doing well”, but faces challenges such as default risks for certain firms due to “mismanagement”, the People’s Bank of China Governor Yi Gang said on Sunday.

* The country’s export growth surprisingly accelerated in September as still solid global demand offset some of the pressures on the economy.

* Economists expect China’s GDP to grow 8.2% this year. While this growth is lower than the 8.6% predicted by a July poll it still represents the most significant annual increase in over a decade. In pandemic-hit 2020, the economy grew 2.3%.

* China has set an annual GDP growth target at above 6% this year, below analysts’ expectations, giving policymakers more room to cope with uncertainties.