Goldman Sachs On 2025 GDP Outlook, Oct Activity & House Prices
The US bank weighs in on the 2025 growth outlook, expected to be supported by a larger fiscal deficit.
Goldman Sachs: "China 2025 outlook: With private demand weak and tariff risks looming, the Chinese economy is facing strong growth headwinds as we head into 2025. We think policymakers will lean against the wind and provide significant easing, including 13% of GDP in augmented fiscal deficit (up from 11.2% in 2024) and 40bp policy rate cuts, to ensure relatively stable growth. We expect real GDP growth to decelerate modestly from 4.9% in 2024 to 4.5% in 2025 and the policy boost to favor consumption vs. investment compared to previous easing cycles. While our growth forecast is in line with consensus, our inflation forecasts (CPI 0.8% and PPI 0% in 2025) are notably below.
Mixed October activity data: Sequential growth of retail sales and services industry output index accelerated in October, while that of industrial production and fixed asset investment decelerated. Both an earlier-than-usual "Singles' Day" online sales festival and the government-subsidized consumer goods trade-in program boosted retails sales, especially cosmetics (40% yoy) and home appliances (39% yoy). Overall, our China Current Activity Indicator (CAI) picked up in October and our Q4 real GDP growth forecast of 8.0% qoq annualized is on track.
Some improvements in housing: Our latest high-frequency tracker showed increased property sales compared to year-ago levels. The official NBS 70-city property prices displayed narrowed declines in house prices in October. However, our property analysts pointed out that leading indicators such as the new home search index softened in early November, raising questions about the sustainability of the October-November property market improvements. In addition, existing home sales continued to outperform new home sales, and property construction contracted further in October, suggesting limited help from increased property sales to real GDP growth."