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China economy under pressure as factory output, retail sales growth slow sharply

Reuters . Beijing
17 Aug 2021 00:00:00 | Update: 17 Aug 2021 02:56:00
China economy under pressure as factory output, retail sales growth slow sharply
People wearing face masks stand on an escalator inside a shopping mall in Beijing, China May 13, 2020 – Reuters Photo

China’s factory output and retail sales growth slowed sharply and missed expectations in last month, as new Covid-19 outbreaks and floods disrupted business operations, adding to signs the economic recovery is losing momentum.

Industrial production in the world’s second largest economy increased 6.4 per v year-on-year in July, data from the National Bureau of Statistics (NBS) showed on Monday. Analysts had expected output to rise 7.8 per cent after growing 8.3 per cent in June.

Retail sales increased 8.5 per cent in July from a year ago, far lower than the forecast 11.5 per cent rise and June’s 12.1 per cent uptick.

China’s economy has rebounded to its pre-pandemic growth levels, but the expansion is losing steam as businesses grapple with higher costs and supply bottlenecks. New Covid-19 infections in July also led to fresh restrictions, disrupting the country’s factory output already hit by severe weather this summer.

Asian share markets slipped on Monday after the data showed a surprisingly sharp slowdown in the engine of global growth.

Data earlier this month also showed export growth, which has been a key driver of China’s impressive rebound from the Covid-19 slump in early 2020, unexpectedly slowed in July.

Consumption, industrial production and investment could all slow further in August, analysts from Nomura said in a note, due to Covid-19 controls and tightening measures in the property sector and high-polluting industries.

Production controls sent crude steel output to the lowest monthly level since April 2020 in July.

Meanwhile China tightened social restrictions to fight its latest Covid-19 outbreak in several cities, hitting the services sector, especially travel and hospitality in the country.

“Given China’s ‘zero tolerance’ approach to Covid, future outbreaks will continue to pose significant risk to the outlook, even though around 60% of the population is now vaccinated,” said Louis Kuijs, head of Asia economics at Oxford Economics, in a note.

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