Why did economic activity accelerate in September?

  • Goldman Sachs' China Current Activity Indicator (CAI) rose to a seasonally adjusted, month-on-month annualized 5.4% in September, up from 4.0% in August; the bank attributed the acceleration mainly to manufacturing.
  • The CAI combines indicators of real activity, including industrial production, electricity consumption and purchasing managers' indices, and converts them into a growth rate comparable with GDP to gauge the economy's recent momentum.
  • The 21-day moving average of Goldman Sachs' macroeconomic data surprise index shows that recent economic data have generally exceeded market consensus expectations; it measures data performance relative to expectations.

What signals did domestic demand and investment indicators send?

  • Alongside the recovery in the September activity indicator, Goldman Sachs' measure of real domestic demand derived from import data showed that domestic demand growth weakened in August. The indicator allocates imports across sectors to final demand according to input-output relationships to track domestic demand.
  • Goldman Sachs' preliminary investment tracker showed that investment growth measured in real value-added terms slowed in the third quarter. The indicator combines data on goods demand and output, equipment sales, construction output and newly signed construction contracts, among other measures, and maps them to fixed capital formation.
  • The inventory tracker indicates that inventory levels may have fallen in the third quarter; Goldman Sachs estimates that the contribution of changes in inventories to quarter-on-quarter real GDP growth in the third quarter of 2026 also weakened.

Where was the change in fiscal support evident?

  • Goldman Sachs' domestic macro policy indicator tightened further in September, mainly because fiscal spending slowed. The indicator also tracks monetary, credit and housing policies alongside fiscal policy.
  • The 12-month moving average of the augmented fiscal deficit as a share of GDP narrowed further in September, and the fiscal funds spending progress ratio also declined; the latter measures the extent to which funds raised through government revenue and bond issuance have been used.
  • Goldman Sachs expects net government bond issuance to accelerate; its forecast of monthly issuance for the rest of the year is based on annual bond issuance quotas, the fiscal policy stance and seasonality, and may change as data and policy signals evolve. City-level real estate policy indicators, meanwhile, show that housing policy continued to ease.

How did financial conditions and the credit impulse change?

  • Goldman Sachs' China financial conditions index, which includes credit quantities, tightened slightly in September, driven mainly by exchange-rate appreciation and stock market declines. The index tracks financial conditions through channels including financing, equity valuations and the renminbi trade-weighted exchange rate.
  • Goldman Sachs estimates that the credit impulse's effect on growth turned negative this year because of weak credit growth; the estimate assumes credit provision remains steady for the rest of the year.