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Prospects Daily: China’s GDP growth slows to 7.4% (y/y) in Q3, but accelerates on quarterly basis

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Financial Markets…Credit-default swaps on German government debt tightened to 35 basis points, the lowest level since October 2010 and down sharply from a record high of 125 bps a year earlier. The country currently has the third largest debt insured by CDS contracts ($18 billion) after France and Italy ($20.7 billion each).

Spanish bonds gained for a third day, pushing the 10-year yield down as low as 5.39% (the lowest level since April), following a successful new bond auction. The country sold €4.61 billion of government securities maturing in 2015, 2016, and 2022 today, exceeding its upper target range of €4.5 billion.

Russia sold 19.6 billion rubles ($638 million) of 15-year government notes at 7.9%, the lowest yield on record, amid a favorable external environment and prospects of a single clearing system. The government also issued 19.1 billion rubles of 5-year securities at 6.98%.

High-income EconomiesUK’s retail sales rose 0.6% (m/m) in September (+2.5% y/y) on increased demand for winter clothing and school uniforms, following a modest 0.1% monthly fall in August. Sales growth accelerated to 2.4% (y/y) in the third quarter from 0.9% in Q2, with consumer spending aided by an improving labor market.

Spain’s exports grew 7.4% (y/y) in August, led by a 22% (y/y) increase in exports to countries outside the EU, while imports declined 3.1% (y/y), resulting in a narrowing of the merchandise trade deficit by 36% (y/y). Spanish industrial orders rose 1% (y/y) in August, the first year-on-year increase in six months, following a 2.6% fall in July.

The unemployment rate in Sweden rose to 7.4% in September from 7.2% in August, as the country’s industries, including car manufacturers, paper and mining companies, suffer from weak demand in the main European export markets. 

The Netherlands'
unemployment rate rose slightly to 6.5% in September from 6.4% the previous month, but the number of unemployed held almost steady rising by a modest 5,000.

Hong Kong’s unemployment rate rose to 3.3% in the three month period to September from 3.2% in August as the slowing local economy weighed on hiring sentiment.

Developing EconomiesChina’s GDP growth accelerated to 2.2% (q/q) in the third quarter from 1.8% in the second quarter. Despite the quarterly increase, GDP growth continued to decline to 7.4% (y/y) in the third quarter from 7.6% in Q2 and 8.1% in Q1.

Other economic data also confirm stabilization of growth in China, with industrial production growing at 9.2% (y/y) in September compared to 8.9% in August and retail sales growth strengthening to 14.2% from 13.2%. Fixed asset investment growth showed a modest increase to 20.5% (y/y) in the nine months to September, compared with 20.2% in August.

Turkey's central bank held its benchmark one-week repurchase rate unchanged at 5.75% but continued to narrow the interest rate corridor by lowering the overnight lending rate by 50 basis points to 9.5% following a 150 basis point cut in September. Inflation momentum has been slowing in Turkey, but headline inflation rose to 9.2% in September from 8.9% in July, remaining well above the central bank’s annual inflation target.