China’s retail sales fall as consumers adopt caution
In this article (5)
China’s retail sales slipped in July, dashing expectations for a modest rise, as consumers in the world’s second-largest economy failed to shake off wariness about the coronavirus.
Meanwhile, the recovery in the factory sector struggled to gain momentum.
Asian markets pulled back on Friday following the disappointing set of economic indicators, which raised concerns about the fragility of China’s emergence from coronavirus.
China’s recovery had been gathering pace after the pandemic paralyzed huge swathes of the economy as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.
However, the data from the National Bureau of Statistics on Friday showed weaker-than-expected year-on-year industrial output growth and retail sales extending declines into a seventh straight month in July. That was slightly offset by firmer property investment, which showed a recent stimulus was supporting construction activity.
“Looking ahead, we expect a renewed acceleration in infrastructure investment in the coming months as planned government bond issuance continues to ramp-up,” said Martin Rasmussen, China Economist at Capital Economics.
“This should drive a further rebound in industry and construction, helping to absorb labor market slack, indirectly shore up consumption and keep the economic recovery on track.”
Industrial output grew 4.8 percent in July from a year earlier, in line with June’s growth but less than forecasts for a 5.1-per-cent rise.
Retail sales dropped 1.1 percent year on year, missing predictions for a 0.1-per-cent rise and following a 1.8-percent fall in June.
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 an 8.2-per-cent fall in June.
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 weighed on momentum.
Questions & Answers
Q.What caused China's retail sales to fall in July?
What caused China's retail sales to fall in July?
Consumers remained cautious about the coronavirus, leading to a decline in spending. This prevented the modest rise in retail sales that had been expected.
Q.Which retail sector saw growth despite the overall decline?
Which retail sector saw growth despite the overall decline?
Auto sales surged by 12.3 percent in July, reversing an 8.2 percent fall recorded in June. This was a key exception to the broad-based decline in other sectors.
Q.How did industrial output perform in July?
How did industrial output perform in July?
Industrial output grew by 4.8 percent year-on-year in July. This was in line with June's growth but less than the 5.1 percent rise that was forecast.
Q.What does Capital Economics predict for infrastructure investment?
What does Capital Economics predict for infrastructure investment?
Capital Economics expects a renewed acceleration in infrastructure investment in the coming months. This is due to continued government bond issuance ramping up.