(Bloomberg) -- Chinese industrial production and retail sales growth slowed last month, though a pickup in investment may indicate that stimulus is beginning to reach the real economy.

• Industrial production growth decelerated to 5.4 percent, below all estimates. Retail sales growth slowed to 8.1 percent. Fixed-asset investment growth sped up, expanding 5.9 percent in the first eleven months of 2018.

Key Insights

• Growth of business investment has decelerated this year thanks to a government deleveraging campaign that led to a much slower increase in infrastructure spending. There are signs that investment is beginning to turn around.
• Retail sales growth has been weak all year, with auto sales particularly bad. The government announced policy tweaks aimed at easing the tax burden on households, and is expected to continue leaning on fiscal stimulus to support the economy in the coming quarters.

Economist Reaction

• “Domestic consumption is under pressure” and headline data will continue to head south in December, according to Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong. While there’s some improvement in investment, it’s not enough to change the whole picture and the government will likely announce a cut in the required reserve ratio soon, he said.
• “China’s retail sales include purchases for business and production and thus are a sign of weaker activities overall,” said Gene Ma, head of China research at the Institute of International Finance in Washington. "More supportive fiscal, monetary and exchange rate policies are needed."

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