BEIJING (Reuters) – China’s retail sales fell in July, expecting modest growth as consumers in the world’s second-largest economy failed to shake up the fight for the coronavirus as the factory sector recovery struggled. to take the rhythm.
PHOTO PHOTO: People wear face masks as they are seen in a shopping mall following a coronavirus (COVID-19) outbreak in Beijing, China July 17, 2020. REUTERET / Thomas Peter
Asian markets retreated on Friday following the disappointing set of economic indicators, which raised concerns about the fragility of China’s emergence from the coronavirus.
China’s recovery was gaining momentum as the pandemic paralyzed much of the economy as demand for growth, government stimulus and surprisingly steady exports revived activity.
However, July data from the National Bureau of Statistics on Friday showed weaker-than-expected growth year-on-year for industrial output and prolonged retail sales fall to a seventh straight month. This was offset slightly by stronger property investments, which showed that the latest stimulus was supporting construction.
Some analysts attributed the loss of momentum in the economy to the torrential rains that have flooded southern China since June and several recent COVID-19 explosions that led to partial blockages.
“Although there may be a modest response to some investment activities if flooding subsides in the coming months, we expect the momentum of sequential recovery to weaken to H2,” Nomura analysts said in a note, citing factors such as declining demand. for pent-up, reduce the chances for more policy easing and rising US-China tensions.
Industrial production grew by 4.8% in July from a year earlier, in line with June growth, but less than a 5.1% growth forecast.
Retail sales fell 1.1% year-on-year, missing forecasts for a 0.1% increase and after falling 1.8% in June.
The decline in retail sales was wide based on clothing, cosmetics, home appliances and furniture all worsening by June.
A major exception was vehicle sales, which rose 12.3%, returning from a decline of 8.2% in June.
“Despite the narrowing of investment decline, consumption remained weak, highlighting the sustained economic shock from the coronavirus pandemic,” said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management.
“Given that we are likely to see a COVID revival in the autumn and winter, it is not recommended that monetary policy be strengthened too early and fiscal policy remain insufficient.”
China-wide nationwide unemployment rate, based on the study, remained at 5.7%, the same as in June.
INVESTMENT SPOT BRIGHT
However, the aid to recover was the investment, which was driven by rapid expansion in the property sector, with analysts expecting infrastructure spending to accelerate in the coming months on the part of government support.
China’s economy returned to growth in the second quarter after a deep decline earlier in the year, but the sudden weakness in domestic consumption has slowed the moment.
Fixed asset investments fell 1.6% in January-July from the same period last year, in line with expectations, but slower than a 3.1% decline in the first half of the year.
July property investments grew to the fastest clip since April last year, backed by strong construction activity and easier lending. New house prices rose at a slightly slower pace in July than a month ago.
Investment in infrastructure, a strong driver of growth, fell 1.0% year-on-year, eased by a 2.7% decline in the first half.
“After the floods are over, I believe reconstruction work for the affected areas will boost fixed asset investment and industrial production,” said Iris Pang, chief economist for Greater China at ING.
Another major risk is the increasingly tense relationship between the US and China ahead of the US presidential election in November, which analysts say has prompted Beijing to focus on growth driven by the country.
“Changes in US-China relations definitely have an impact on China as well as the United States,” statistics office spokesman Fu Linghui told a news conference.
“We still hope to maintain equal and mutually beneficial development (in relationships).”
Additional reporting by Colin Qian; Edited by Sam Holmes