China’s domestic spending sluggish as economy recovers from virus

BEIJING (AFP) – China’s retail sales dropped in July, official data showed yesterday, indicating that sluggish consumer spending could hold up the country’s recovery from the coronavirus outbreak.

Retail sales – a key indication of consumer sentiment – shrank by 1.1 per cent on-year, falling short of forecasts and suggesting many are still reticent about going out to spend time and money, even as China appears to have the virus largely under control.

The latest data follows a drop of 1.8 per cent on-year for retail sales in June.

Bloomberg analysts had projected sales would recover to a modest 0.1 per cent growth.
While the sale of goods just crept into positive territory, growing 0.2 per cent, the catering industry was particularly badly hit, with sales down 11 per cent.

The retail sector has an increasingly important role in China’s economy as leaders look to consumers, rather than trade and investment, to drive growth.

An employee helps a man make a purchase at a store in a shopping mall in Beijing. PHOTO: AP

A domestic consumption pickup is crucial as external demand weakens, with other countries battling the pandemic.

Spokesman for the National Bureau of Statistics (NBS) Fu Linghui said the data showed “a trend of steady recovery”.

Industrial production grew by 4.8 per cent in July – the same as the previous month, but below predictions from Bloomberg analysts of 5.2 per cent growth.

Meanwhile fixed asset investment for the year so far was down 1.6 per cent year-on-year; an improvement on last month’s data, but still weak.

“Not the best of economic numbers out of China today with both retail sales and industrial production underwhelming,” said Chief Global Markets Strategist at AxiCorp Stephen Innes.

“The glaring concerns around retail demand continue to speak volumes that it’s going to take more than stimulus and deep discounts on luxury products to get people shopping again.”