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Home / Business / China’s economic recovery sank amid a still elusive consumer return

China’s economic recovery sank amid a still elusive consumer return



BEIJING (Reuters) – China’s retail sales slumped in July, slowing expectations for modest gains, as consumers in the world’s second-largest economy can’t avoid being wary of viruses. coronavirus, while the recovery of the plant area struggled to keep up the speed.

FILE PHOTO: People wear protective masks when they are seen in a shopping mall following an outbreak of coronavirus (COVID-19) in Beijing, China July 17, 2020. REUTERS / Thomas Peter

Asian markets fell on Friday following a disappointing set of economic indicators, raising concerns about the fragility of China’s emergence from the coronavirus.

China’s rebound has been gaining momentum after a pandemic crippled a huge economy as demand was compressed, government stimulated and exports were surprisingly 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 is slightly offset by stronger real estate investment, which shows that recent stimulus measures are supporting construction.

Some analysts say the economy lost momentum due to torrential rains that have swept South China since June and a number of new COVID-19 outbreaks resulted in a partial shutdown.

Nomura analysts said: “While there may be a modest rebound in some investment activities if flooding subsides over the coming months, we expect a weaker sequential recovery in H2, ”Nomura analysts said in a note, citing factors such as pent-up demand, a reduced chance of more policy easing and rising US-China tensions.

Industrial output rose 4.8% in July from a year earlier, in line with the June growth but lower than the 5.1% forecast.

Retail sales fell 1.1% year-on-year, lacking the prediction of a 0.1% increase and followed the June 1.8% decline.

The drop in retail sales was mainly due to the deterioration 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 falling investment, consumption remains weak, highlighting the prolonged economic shock from the coronavirus pandemic.”

“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.

INVESTMENT LIGHT

However, helping to drive the rebound 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 to 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.

“After the flooding ends, I believe that reconstruction work for the affected areas will drive fixed asset investments and industrial production,” said Iris Pang, chief economist for Greater China at ING. said.

Another major risk is the increasingly tense US-China relationship ahead of the US presidential election in November, 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 news conference.

“We still hope to maintain the development of equality and mutual benefit (in relationship).”

Additional reporting by Colin Qian; Edited by Sam Holmes

Our standards:Thomson Reuters Trust Principles.

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