Sat, Aug 15, 2020 page10

• China’s economic recovery loses steam

  STALLED: Industrial output growth was weaker than expected last month, while retail sales extended their decline, with some analysts blaming floods in the south

  • Reuters, BEIJING
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  China’s retail sales slipped last month, dashing expectations for a modest rise, as consumers in the world’s second-largest economy failed to shake off wariness about the COVID-19 pandemic, while the factory sector’s recovery struggled to pick up pace.

  China’s recovery had been gaining momentum after the pandemic paralyzed huge swathes of the economy as pent-up demand, government stimulus and surprisingly resilient exports revived activity.

  However, data released by the National Bureau of Statistics yesterday showed weaker-than-expected year-on-year industrial output growth and retail sales extending declines into a seventh straight month.

  

  Bicycles are submerged by water along a flooded street after heavy rains hit the area in Linyi in China’s Shandong Province yesterday.

  Photo: AFP

  That was slightly offset by firmer property investment, which showed recent 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 fresh COVID-19 outbreaks that led to partial lockdowns.

  “Although there could be a modest rebound in some investment activities if the floods subside in coming months, we expect sequential recovery momentum to get weaker in H2,” Nomura analysts said in a note, citing factors such as receding pent-up demand, diminished chances of more policy easing and rising US-China tensions.

  Industrial output grew 4.8 percent last month from a year earlier, in line with June’s growth, but less than a forecast 5.1 percent rise.

  Retail sales dropped 1.1 percent on year, missing predictions for a 0.1 percent rise and following June’s 1.8 percent fall.

  The decline in retail sales was broad based, with garments, cosmetics, home appliances and furniture all worsening from June. A key exception was auto sales, which surged 12.3 percent, turning around from an 8.2 percent fall in June.

  “Despite narrowing declines in investment, consumption remained weak, highlighting the lasting economic shock from the coronavirus pandemic,” Zhonghai Shengrong Capital Management chief economist Zhang Yi said.

  “Given we are likely to see a resurgence of COVID in the autumn and winter, it is not recommended that monetary policy be tightened too prematurely and fiscal policy stay insufficient,” Zhang said.

  China’s nationwide survey-based jobless rate remained elevated at 5.7 percent last month, the same as June.

  Helping carry the recovery, however, was investment, which was driven by the fast expansion in the property sector, with analysts expecting infrastructure spending to accelerate in coming months on the back of government support.

  China’s economy returned to growth in the second quarter after a deep slump at the start of the year, but unexpected weakness in domestic consumption has slowed the momentum.

  Fixed-asset investment fell 1.6 percent in the first seven months of the year from the same period last year, in line with expectations, but slower than a 3.1 percent decline in the first half of the year.

  Property investment last month grew at the quickest clip since April last year, underpinned by solid construction activity and easier lending. New home prices rose at a slightly slower pace last month from a month earlier.

  Infrastructure investment, a powerful driver of growth, fell 1 percent year-on-year, easing from a drop of 2.7 percent in the first half.

  “After the floods are over, I believe the reconstruction work for affected areas will boost fixed-asset investment and industrial production,” ING chief economist for Greater China Iris Pang (彭藹嬈) said.

  Another major risk is the increasingly tense US-China relationship ahead of the US presidential elections in November, which analysts say has prompted Beijing to focus on domestically driven growth.

  “Changes in US-China relations definitely have an impact on China, as well as the United States,” statistics bureau spokesman Fu Linghui (傅令輝) told a press conference.

  “We still hope to maintain the equal and mutually beneficial development” in relations,” Fu said.
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