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China factory production, retail sales up in July but weaker than expected – AFR


Factory production and retail sales in China rose modestly in July but were weaker than analysts’ expectations, official data showed on Monday, as a resurgence of Covid-19 and jitters in the property market dampened hopes of a stronger economic recovery .

The world’s second-largest economy saw a rebound in business activity as some coronavirus restrictions were eased in June, but the rebound is flagging and Beijing remains bound by a zero-Covid policy of immediate lockdowns and lengthy quarantines, which has hurt sentiment.

But in July, China’s industrial production rose 3.8 percent year on year, compared with a 3.9 percent increase in June, the National Bureau of Statistics (NBS) said on Monday.

Retail sales grew at a slower-than-expected 2.7 percent year-on-year, up from 3.1 percent in June, while the urban unemployment rate fell to 5.4 percent, the NBS said.

“The risk of stagflation in the global economy is rising and the basis for a domestic economic recovery is not yet solid,” the NBS warned in a statement.

Retail sales are likely to have faltered “due to some renewed virus disruption and the hit to consumer sentiment from the housing market woes,” said Julian Evans-Pritchard, chief China economist at Capital Economics, in a recent report.

“July’s economic data is very alarming,” Raymond Yeung, Greater China economist at Australia & New Zealand Banking Group Ltd, told Bloomberg TV.

“The Covid-Zero policy continues to hit the service sector and dampen household consumption.”

China’s real estate sector has reeled, with frustrated homebuyers participating in mortgage boycotts in dozens of cities while defaulting developers struggle to complete projects.

China’s economic growth in the second quarter was just 0.4 percent year on year – the slowest rate since the first Covid outbreak.

Credit growth in the country also eased slightly in July, with analysts at Nomura saying in a report that doesn’t bode well for the second half of the year.

“The combination of the zero-Covid strategy and the deteriorating real estate sector continues to drag the economy down, even as export growth remains high and the auto sector gets a boost from the land transfer tax cut,” Nomura analysts said.

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