China’s consumer and factory data misses expectations in July

Employees working on an air conditioner production line at a Midea factory in Guangzhou, China.

Jade Gao | AFP | Getty Images

BEIJING — China released data for July well below expectations.

Retail sales rose 2.7% in July from a year ago, the National Bureau of Statistics said Monday. That’s well below the 5% growth predicted by a Reuters poll, and down from 3.1% growth in June. Within retail sales, food service, furniture and construction-related categories posted declines.

Automobile sales, one of the largest categories by value, rose 9.7%. The gold, silver and jewelry category saw its sales rise the most, up 22.1%.

Industrial production rose 3.8%, also missing expectations of 4.6% growth and a decline from the 3.9% rise the previous month.

Capital investment for the first seven months of the year rose 5.7% from a year ago, missing expectations for a 6.2% growth.

Investment in real estate declined at a faster pace in July than in June, while investment in manufacturing slowed its pace of growth. Infrastructure investment increased at a slightly faster pace in July than in June. Capital investment data is only published on an annual basis to date.

The unemployment rate among young Chinese, aged 16 to 24, was 19.9%. The unemployment rate for all ages in cities was 5.4%.

“The national economy has maintained the momentum of the recovery,” the statistics office said in a statement. But he warned of rising “risks of stagflation” globally and said “the foundations for the recovery of the national economy still need to be consolidated”.

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Analyst forecasts for July were expected to show a pick-up in economic activity from June as China put behind it the worst of this year’s Covid-related lockdowns, particularly in metropolitan Shanghai.

Exports remained robust last month, rising 18% year-on-year in US dollar terms despite growing concerns over falling global demand. Imports lagged, climbing just 2.3% in July from a year earlier.

However, China’s massive real estate sector came under renewed pressure this summer. Many homebuyers have halted their mortgage payments to protest delays by developers in building homes, which are typically sold before completion in China.

Deteriorating confidence jeopardizes future developer sales – and an important source of cash flow.

The potential for a Covid outbreak remained another drag on sentiment. A wave of infections in tourist destinations, particularly the island province of Hainan, has stranded tens of thousands of tourists this month.

The local situation reflects the significant gap between the objectives set at the start of the year and the ensuing reality. Hainan had set a GDP target of 9%, but was only able to grow 1.6% in the first six months.

Similarly, domestically, China’s GDP grew only 2.5% in the first half of the year, well below the annual target of around 5.5% set in March.

China’s top leaders indicated at a meeting in late July that the country could miss its GDP target for the year. The meeting did not announce any large-scale stimulus ahead, while noting the importance of price stabilization.

The country’s consumer price index hit a two-year high in July as pork prices rebounded.

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