China’s factory, retail sectors skid as COVID hits growth

Date:

  • Industrial production growth in China is slowing more than expected
  • The contraction in retail sales is deepening
  • Real estate investment is falling the most in more than two decades
  • National unemployment rate is rising
  • Near-term outlook darkens after COVID analysts ease

BEIJING, Dec. 15 (Reuters) – China’s economy lost more steam in November as factory production slowed and retail sales continued to fall, both missing forecasts and recording its worst figures in six months, hampered by rising COVID-19 cases and widespread virus restrictions.

The data suggested a further deterioration in economic conditions as lockdowns in many cities, a tightness in the real estate sector and weakening global demand pointed to a bumpy road even as Beijing lifted some of the world’s toughest antivirus restrictions following widespread and infrequent public protests .

Industrial production rose 2.2% year-on-year in November, falling short of expectations for a 3.6% gain in a Reuters poll and growth slowing significantly from 5. 0% in October, National Bureau of Statistics (NBS) data showed on Thursday. It was the slowest growth since May, due in part to disruptions in key manufacturing hubs Guangzhou and Zhengzhou.

Retail sales fell 5.9% amid general weakness in the services sector, also the biggest contraction since May. Analysts had expected the consumption gauge to shrink by 3.7%, following a 0.5% fall in October.

In particular, sales in the contact-intensive catering sector fell 8.4% year-on-year, an acceleration from the 8.1% decline in October.

Meanwhile, car production fell 9.9%, after rising 8.6% in October.

The Chinese yuan fell against the dollar on Thursday as the data eroded investor confidence.

“The weak activity data suggests further policy easing is needed to revive growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increased magnitude of MLF rollover this morning is consistent with overall easing policy tones. Looking ahead, we also forecast MLF rates will be cut by 10 basis points in the first quarter.”

China’s central bank on Thursday increased cash injections into the banking system and maintained medium-term policy lending rates, or MLF, to keep liquidity conditions loose.

Reuters Graphic Reuters Graphic

The world’s second-largest economy has been squeezed by its zero-COVID policy as tight movement controls hampered consumption and production. Other setbacks facing the country include the slump in the real estate sector, the risks of a global recession and geopolitical uncertainties.

Real estate investment fell 19.9% ​​year-on-year, the fastest rate since the bureau of statistics began collecting data in 2000, according to Reuters calculations based on data from the NBS.

Policymakers have rolled out support for the sector on nearly all fronts, including bank credit lines, bond financing and equity financing, but analysts said such effects have yet to be seen as home sales are still weak.

Fixed asset investment rose 5.3% in the first 11 months of the year, versus expectations for a 5.6% increase and 5.8% growth in January-October.

Hiring remained low among companies wary of their finances. The national unemployment rate rose from 5.5% in October to 5.7% in November. Youth unemployment fell from 17.9% in October to 17.1%.

“The December data may be even worse — that’s not because everything is getting worse in China, but because the end of the tunnel is approaching,” said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis.

“I expect a major collapse in industrial production in December. This will be the immediate result of the opening,” she said, cutting fourth-quarter GDP growth to 2.8% from 3% earlier.

China has laid out plans to expand domestic consumption and investment, state media said on Wednesday, as policymakers face multiple challenges following abrupt easing of harsh COVID-related restrictions, which are expected to usher in a wave of infections.

That would hit businesses and consumers, while a weakening global economy hurts Chinese exports.

China’s economy grew at just 3% in the first three quarters of this year and is expected to stay around that rate throughout the year, well below the official target of “around 5.5%”.

All eyes are on the annual Central Economic Work Conference, where China’s leaders meet to set the economic agenda for next year. They are likely to map out more stimulus moves, keen to support growth and mitigate disruptions caused by a sudden end to COVID-19 restrictions, policy insiders and analysts said.

($1 = 6.9593 Chinese Yuan)

Additional reporting by Liz Lee, Liangping Gao and Kevin Yao; Edited by Sam Holmes

Our Standards: The Thomson Reuters Principles of Trust.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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