China's property sector contracts for first time since pandemic

Output in the real estate industry shrank 1.6 per cent from a year ago. PHOTO: REUTERS

BEIJING (BLOOMBERG) - China's property and construction industries have contracted in the third quarter for the first time since the start of the Covid-19 pandemic, weighed by a slump in real estate.

Output in the real estate industry, a mainstay of the economy as its activities support sectors from furniture to commodities, shrank 1.6 per cent from a year ago, according to a supplemental report on gross domestic product released on Tuesday (Oct 19) by the National Bureau of Statistics.

The sector grew 7.1 per cent in the three months till June and this contraction is the first since the first quarter of 2020.

The construction industry's output fell by 1.8 per cent, also its first decline since the pandemic. Before the pandemic, that sector had never contracted in data back to 1992.

The escalating debt crisis at China Evergrande Group and other developers has undermined consumers' confidence in buying homes, and exacerbated the effect of tight curbs on property developers' financing and property sale restrictions to cap prices.

The combined sales of China's top 100 developers plummeted 36 per cent year on year in September, and the slow government-funded infrastructure construction has also undercut the building sectors.

China's economy slowed further in the third quarter, weighed down by the housing slump and electricity shortages, data released on Monday showed. Gross domestic product expanded 4.9 per cent from a year earlier, down from 7.9 per cent in the previous quarter. Growth of investment and industrial production was sluggish, while retail sales rebounded slightly.

Production halts at factories across the country due to a power shortage were reflected in the slowdown of the manufacturing industry, which expanded by 4.6 per cent in the third quarter, down from 9.2 per cent in the previous quarter.

The data prompted many economists to downgrade their growth forecasts. Officials have signalled that they are not rushing to stimulate the economy, but will provide targeted support.

People's Bank of China governor Yi Gang recently forecast that the economy would expand about 8 per cent this year, exceeding Beijing's official target of above 6 per cent.

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