BEIJING (Reuters) – China’s retail sales slumped in July, lowering expectations for modest gains, as consumers in the world’s second-largest economy are inevitably wary of coronavirus. , while the recovery of the factory sector struggled to keep pace.
FILE PHOTO: People wear face masks when they are seen in a shopping complex following an outbreak of coronavirus (COVID-19) in Beijing, China July 17, 2020. REUTERS / Thomas Peter
Asian markets fell on Friday following disappointing set of economic indicators, raising concerns about the fragility of China’s emergence from the coronavirus.
China’s rebound is gaining momentum after a pandemic crippled its giant economy as demand was suppressed, government stimulus and exports were staggeringly resilient.
However, July data from the National Bureau of Statistics on Friday showed that annual industrial output growth was weaker than expected, and retail sales fell for the seventh consecutive month. That has been slightly offset by stronger real estate investment, which suggests recent stimulus measures are supporting construction.
Some analysts say the economy lost momentum due to torrential rains that have swept into southern China since June and a number of new COVID-19 outbreaks resulted in a partial shutdown.
Nomura analysts said: “While there could be a modest rebound in some investment activities if flooding subsides in the coming months, we expect the sequential recovery to weaken. in H2, ”Nomura analysts said in a note, citing factors such as shrinking demand, a reduced chance of more policy easing and rising US-China tensions.
Industrial output rose 4.8% in July from a year earlier, consistent with June’s increase but well below the 5.1% forecast increase.
Retail sales fell 1.1% year-on-year, lacking the prediction of a 0.1% increase and followed the June 1.8% decline.
The decline in retail sales was mainly due to the worsening of apparel, cosmetics, home appliances and furniture since June.
One key exception was auto sales, up 12.3 percent, around a 8.2 percent drop in June.
Zhang Yi, chief economist at Zhonghai Shengrong Capital Management, said: “Despite the decline in investment, consumption remains weak, indicating a lingering economic shock from the coronavirus pandemic,” said Zhang Yi, chief economist. at Zhonghai Shengrong Capital Management said.
“Since we are likely to see a resurgence of COVID in the fall and winter, tight monetary policy should not be tightened too soon and fiscal policy inadequate.”
China’s July nationwide unemployment rate is still rising at 5.7%, the same as June.
However, helping to drive the recovery is investment, fueled by the rapid expansion in the real estate sector, with analysts expecting infrastructure spending to accelerate in the coming months. thanks to the government’s support.
The Chinese economy rebounded in the second quarter after a deep decline at the beginning of the year, but the sudden weakening of domestic consumption slowed growth.
Investment in fixed assets fell 1.6% in January-July compared with the same period last year, as expected but slower than the 3.1% decline in the first half of the year.
July real estate investments grew the fastest since April last year, underpinned by solid construction and easier lending. New home prices rose at a slightly slower rate in July from a month earlier.
Investment in infrastructure, a strong driver of growth, fell 1.0 percent year-on-year, down from a 2.7 percent drop in the first half of the year.
Iris Pang, chief economist for Greater China at ING, said: “After the flooding ends, I believe that reconstruction work for the affected areas will spur fixed asset investment and production. industry.
Another major risk is the increasingly tense US-China relationship ahead of the November US presidential election, which analysts say prompted Beijing to focus on domestic growth.
“The changes in US-China relations certainly have an impact on China, as well as the United States,” Statistics Bureau spokesman Fu Linghui said at a press conference.
“We still hope to maintain the development of equality and mutual benefit (in relationship).”
Additional reporting by Colin Qian; Edited by Sam Holmes