Friday, September 17, 2021

China’s slowdown worsens as the outbreak of Covid exposes consumer weakness

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China’s economic slowdown worsened in August as the outbreak of the coronavirus exposed a prolonged weakness in consumer spending and cast great doubts on the country’s growth prospects.

August retail sales were up just 2.5% year-over-year, well below economists’ forecast of 7%, the slowest increase in 12 months.

Industrial production that was one of the main engines behind China Recovery that hits the world Official data said Wednesday that it also failed to meet its goal of adding 5.3% in 2020.

The numbers show that recent floods, regulatory interventions, new coronavirus infections, and a slowdown in real estate have pushed growth expectations down, raising concerns about a loss of momentum for the Chinese economy as a whole.

Consumer activity, which lags behind the country’s wider recovery during the pandemic process, was hit hard by the turmoil as households remained cautious. Catering and restaurant retail sales fell 4.5%, the first reduction since November 2020, HSBC analysts said.

Carlos Casanova, Senior Economist at UBP, said:

Coronavirus outbreaks in recent months have been centered around cases of the Covid-19 delta mutant that originally occurred in Nanjing in July, and have curtailed travel and consumption after authorities took precautions.

Dozens of new cases were reported last week in southern Fujian, where authorities closed schools.

“As long as China maintains a zero-tolerance policy against Covid-19, they will have to shut down, leaving their economies vulnerable to potential local outbreaks,” Casanova said. Added. “It will lead to reduced consumption and disruption of the supply chain.”

Goldman Sachs Analyst Last Month Lowered growth forecast China’s real GDP in the third quarter rose from 5.8% to 2.3%. It also shows the “meaningful deceleration” of industrial indicators such as power generation and iron and metal smelting.

Weak economic indicators and expectations are in line with the slowdown in the real estate sector of countries that account for about 28% of economic activity, according to Bank of America, taking into account both direct and indirect contributions to growth.

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Crisis surrounding EvergrandeWith hundreds of projects nationwide, the country’s most debt-ridden developers are spotlighting Beijing’s efforts over the past year to reduce leverage in this sector.

Weak data sparked controversy over the prospects for further policy intervention after the People’s Bank of China unleashed more liquidity in the banking system in July by lowering the reserve requirement ratio.

“I don’t think policymakers will significantly ease their overall macro-policy stance,” said Tommy Wu of Oxford Economics. “But Beijing is keen to avoid a sharp slowdown and will be willing to take steps to support growth more than ever this year,” he said.

China’s slowdown worsens as the outbreak of Covid exposes consumer weakness

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