Short-term economic growth may have stabilized. In October, we expect faster growth of industrial production, investment and consumption, rebound of export and import growth, and higher inflation. The US dollar appreciation in October had a negative valuation effect on China’s FX reserves. Credit growth may have slowed due to property market controls.

Industrial production growth to accelerate. The six major power plants’ coal consumption grew faster YoY in October than in September despite falling seasonally. The number of working days in October was flat YoY, the same as in September; but industrial production in September was affected by the G20 summit. We expect industrial output growth in October to accelerate to 6.3% YoY (September: 6.1%).

Fixed asset investment growth to stabilize. Property sales growth slowed after a number of cities imposed property control measures, affecting real estate investment. But as industrial product prices rebounded, manufacturing and private investment stabilized. We expect fixed asset investment growth over January~October to be 8.3% YoY (January~September: 8.2%).

Consumption to grow steadily. YoY growth in car sales may slow in October, as the purchase tax cut for low displacement cars was introduced in October 2015. But the 11/11 promotional activities began earlier this year than last, benefitting online sales in October. A pickup in CPI inflation would also boost nominal retail sales growth. We expect retail sales growth in October to be 10.8% YoY (September: 10.7%).

Export and import growth to rebound. Export and import growth in September slumped due to high base effect and the G20 summit. We expect export growth in October to rebound to -7% YoY (September: -10%) and import growth to rebound to 0% (September: -1.9%), with trade surplus estimated at US$47.8bn (September: US$42bn).

CPI to continue to rise. Food prices are expected to rise faster YoY in October than in September, as the seasonal decline was smaller than a year ago. The rise of housing prices pushed up residence-related and service prices. According to the NBS, housing prices in 15 tier-1 and key tier-2 cities were still rising in the first half of October. We expect CPI in October to fall MoM and its YoY growth to accelerate to 2.2% (September: 1.9%).

PPI to rise faster. Coal prices have doubled since the coal industry’s 276-working-day production limit was implemented in April. Higher coal prices pushed up chemical and aluminum prices. Cement prices in central China also jumped due to production limits in Henan, Hebei and Shandong. We expect PPI in October to continue to rise MoM and its YoY growth to accelerate to 1.1% (September: 0.1%).

FX reserves to decline. The stronger US dollar in October would have a negative valuation effect on China’s FX reserves (pushing down the dollar value of non-dollar assets). The renminbi weakened in October and the daily turnover of the interbank FX market increased, indicating FX outflows. We expect FX reserves in October to shrink US$60bn (September: -US$18.8bn).

Credit growth to slow. The property control measures introduced by tier-1/2 cities will slow mortgage growth. The CICC banking team estimates new loans in October at Rmb570bn (September: Rmb1.22trn) and new total social financing at Rmb800bn (September: Rmb1.72trn). There were continued FX outflows and a seasonal increase in fiscal deposits would also reduce the base money. We expect M2 growth in October to edge down to 11.4% (September: 11.5%).