China released economic data revealing a boost in retail sales and slower declines in home prices, signalling economic recovery amid recent stimulus efforts. This recovery could benefit European luxury and mining stocks, as China’s demand strengthens.
China’s latest economic data showed recovery momentum in the world’s second-largest economy, largely influenced by a range of recent stimulus measures.
October’s retail sales growth stood out, rising 4.8% year-on-year – marking the strongest gain in eight months – while industrial production increased by 5.3%, though it missed the forecasted 5.5% rise. Additionally, home prices declined at a reduced rate, hinting that support for the housing market is taking effect.
Positive Signs of Improvement in China’s Economy
The recent gains in retail sales and stabilisation in the property market are promising for China’s economic outlook and could signal renewed demand for global exporters. China’s consumer demand struggled under the weight of deflation and weakening imports, while a prolonged housing crisis undermined investment and consumer confidence. The uptick in retail sales and housing markets points to recovering domestic consumption and economic improvement.
The National Bureau of Statistics of China (NBS) noted: “With the accelerated implementation of the existing policies and the introduction of a raft of incremental policies in October, the national economy showed a stable growth trend, with major indicators recovering notably and positive factors accumulated.”
Over the weekend, the National Bureau of Statistics (NBS) reported that China’s Consumer Price Index (CPI) increased by 0.3% annually in October, a slight decrease from September’s 0.4% rise.
Meanwhile, the Producer Price Index (PPI) dropped 2.9% year-on-year, indicating intensified deflation in manufacturing. Analysts suggested that the Golden National Week may have influenced these year-on-year readings, possibly masking the effects of recent stimulus policies. Additionally, core inflation, which excludes volatile items such as food and energy, edged up to 0.2% from 0.1% in September.
In response to this data, Chinese stock markets rallied briefly on Friday, with the China A50 rising 0.7% and the Hang Seng Index gaining 0.8% after the data release, though both indices later pared back gains. The Chinese Yuan has appreciated modestly against the US dollar from a nearly four-month low.
Despite the positive impacts of stimulus measures, external pressures persist, with Donald Trump recently vowing to impose 60%-100% tariffs on Chinese imports, adding a layer of uncertainty.
The NBS warned: “We should be aware that the external environment is increasingly complicated and severe, effective demands are still weak at home, and the foundation for continuous economic recovery needs to be strengthened.
“Trump’s tariff policies could further challenge Chinese exports, exacerbating production cuts and adding strain to the recovery,” Dilin Wu, a research strategist at Pepperstone, wrote in an email. “The yuan’s future will likely depend more on China’s policy responses to the Trump administration than on market sentiment or capital flows,” she added.
Implications for European Luxury and Mining Sectors
China’s economic health, particularly in consumer spending and property markets, holds significant sway over European sectors such as luxury goods and mining.
LVMH, for instance, has seen shares dip since October due to soft earnings and heightened tariff threats from the US, erasing gains achieved in September when China’s stimulus was first announced. European mining stocks have also taken hits due to weaker metal prices, driven by a stronger US dollar and concerns about Chinese demand.
With China’s economic recovery showing potential signs of firming, luxury brands and mining companies could find support amid recent downtrends. The stabilisation in Chinese consumer demand and property markets may provide a much-needed boost to these European sectors as stimulus effects continue to take hold.