China posted July data that fell far short of expectations, as the real estate crisis and Covid regulations pulled down growth.
The National Bureau of Statistics reported Monday that retail sales increased by 2.7 per cent year on year in July. That’s considerably below the 5 per cent growth projected by Reuters, and it’s down from 3.1 per cent growth in June. Catering, furnishings, and construction-related categories also reported decreases in retail sales.
Automobile sales, one of the most valuable categories, increased by 9.7 per cent. Sales of gold, silver, and jewellery increased the most, by 22.1 per cent. According to reports based on official data, online sales of tangible goods increased by 10% year on year, quicker than in June.
Industrial production increased by 3.8 per cent, falling short of estimates for 4.6% growth and falling short of the previous month’s 3.9% increase.
Fixed asset investment increased by 5.7 per cent in the first seven months of the year, falling short of estimates for 6.2 per cent growth.
Real estate investment declined quicker in July than in June, while manufacturing investment slowed its rate of increase. Infrastructure investment increased at a somewhat quicker rate in July than in June. Data on fixed asset investment is only available on a year-to-date basis.
“This year, the property market overall has shown a downward trend,” Fu Linghui, spokesperson of the National Bureau of Statistics, told reporters in Mandarin, according to a reports.
“Real estate investment has declined, and may have had some impact on related consumption,” he said.
While the total unemployment rate in cities fell to 5.4% in July, the percentage among young people remained stubbornly high. The young unemployment rate in China, ages 16 to 24, was 19.9%. According to Wind data dating back to 2018, this is the highest ever recorded.
Fu ascribed the high rate of youth unemployment on Covid’s impact on business operations and hiring ability. He specifically mentioned how the services industry, which employs a bigger proportion of young people, has recovered slowly. Fu also mentioned young people’s current inclination for more stable professions.
Jobs at state-owned corporations are more likely to be stable in China than ones at start-ups or smaller businesses.
“The national economy maintained the momentum of recovery,” the statistics bureau said in a statement. But it warned of rising “stagflation risks” globally and said “the foundation for the recovery of the domestic economy is yet to be consolidated.”
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Analysts predicted that economic activity in July would increase from June, as China put the worst of this year’s Covid-related lockdowns behind it, particularly in the city of Shanghai.
Despite rising fears about weakening global demand, exports remained solid last month, increasing by 18 per cent year on year in US dollar terms. Imports trailed, increasing by only 2.3 per cent year on year in July.
However, this summer has seen renewed pressure on China’s enormous real estate sector. Many homebuyers in China have stopped making mortgage payments to protest developer delays in building homes, which are often sold ahead of completion.
The decline in trust jeopardises developers’ future sales – a crucial source of revenue flow.
Construction delays, according to Statistics spokeswoman Fu, are regional in nature.
He stated that the real estate market is “in the process of forming a bottom,” and that its impact on the economy would “gradually improve.”
In response to another question, Fu stated that once Covid is under control, customers’ pent-up desire will be discharged.
Another damper on morale has been the possibility of a Covid outbreak. This month, tens of thousands of tourists were stranded due to an outbreak of diseases in tourist destinations, particularly the island province of Hainan.
The local scenario illustrates the significant disparity between the targets set at the start of the year and the actual results. Hainan declared a GDP target of 9 per cent but only achieved 1.6% growth in the first six months.
Similarly, China’s GDP increased by only 2.5 per cent in the first half of the year, considerably below the full-year target of roughly 5.5 per cent set in March.
When asked about the target on Monday, Fu remained silent. However, he cited a slew of impediments to growth both at home and abroad, including rising uncertainty outside.
Looking ahead, Fu stated that China’s economy “still faces many dangers and obstacles” in order to prolong its recovery and keep operations within a “reasonable range.”
China’s senior officials suggested in late July that the country might miss its GDP target for the year.
The summit did not foreshadow any large-scale stimulus, but it did emphasise the significance of price stability.
In July, the country’s consumer price index reached a two-year high as pork prices rebounded.
According to Citi, the People’s Bank of China unexpectedly dropped rates on two of its lending rates before of Monday’s data release, both for the first time since January.
(Adapted from Reuters.com)