China economy’s broad recovery from coronavirus continues, as retail sales grow for first time in 2020

Industrial production grew by 5.6 per cent in August from a year earlier, with retail sales growing by 0.5 per cent
Economic recovery in China continues to be powered by industry, but retail sector records best performance of 2020
China’s retail sector returned to growth in August for the first month since December 2019. Photo: AP
China’s retail sector returned to growth in August for the first month since December 2019. Photo: AP

Industry, retail and investment all showed marked improvements in August, as the Chinese economy continued its broad-based recovery from the ravages of the coronavirus earlier this year, according to new data released by the National Bureau of Statistics on Tuesday.

Retail sales, a vital metric of consumption in the world’s biggest market, grew by 0.5 per cent compared to the same month last year, upfrom minus 1.1 per cent in July and ahead ofanalysts’ expectations of 0.0 per cent growth. This marked the first growth in the retail sector this year, with January and February’s data having been combined to account for distortions relating to the pandemic.

Industrial production, which gauges manufacturing and mining activity in the world’s second largest economy, grew by 5.6 per cent year on year in August, up from 4.8 per cent in July. This was better than analysts’ expectations, with the median result of a Bloomberg poll of economists forecasting 5.1 per cent growth. It was also the best industrial growth since December 2019.

Fixed asset investment, the year-to-date value of spending on real estate, infrastructure and capital equipment, fell by 0.3 per cent from a year earlier in the first eight months of 2020. This was an improvement on July’s minus 1.6 per cent reading, as investment edges back towards growth following a collapse in the early part of the year. It was also better than the median forecast of minus 0.4 per cent.

The surveyed jobless rate surveyed jobless rate dropped to 5.6 per cent in August, from 5.7 per cent in July. However, while this is an indicator of the unemployment rate in a certain segment of the urban population, it is not viewed as an accurate depiction of the overall employment situation.

This marks the first month since December 2019 that retail sales have not fallen in China, in what has been a time of strain for the consumer economy. It comes as the government in Beijing attempts to give the domestic economy renewed focus, as part of its dual circulation plan.

We think that China’s economic recovery is on a reasonably firm footing now and should continue through the fourth quarter and into 2021Louis Kuijs

“We think that China’s economic recovery is on a reasonably firm footing now and should continue through the fourth quarter and into 2021, with solid investment growth, gradually recovering consumption momentum and resilient exports,” said Louis Kuijs, head of Asia at Oxford Economics.

Shops, restaurants and entertainment venues were closed for much of the first quarter, but even as they reopened, people were reluctant to engage in the sort of spending the authorities might have hoped would kick-start the recovery.

Things have been slowly getting better, with passenger car sales rising 9.0 per cent in August from a year earlier, and continuing to grow strongly into the first weeks of September, according to the China Passenger Car Association.Cinema box office revenue, however, fell 56.8 per cent in August, according to the China Movie Data Information Network, cited by Nomura, but this has since recovered strongly to 51.0 per cent growth in the first 12 days of September, boding well for the current month as a whole.

But for the most part, the recovery in China over the course of 2020 has been powered by traditional levers of growth: soaring exports and a booming construction sector.

This trend continued in August with excavator sales – a barometer of the amount of construction work in China – rocketing 51.3 per cent year on year in August, after growing 54.8 per cent in July and 63.1 per cent in the second quarter of the year, according to the China Construction Machinery Association.

Meanwhile, heavy-duty truck sales rose 74.7 per cent in August, per industry data cited by Nomura, significant growth even if it was down from 89.0 per cent in July.Data released by the customs agency last week showed that China’s exports grew by 9.5 per cent in August, while imports shrank by 2.1 per cent, as the country’s overall trade surplus narrowed. The trade data emphasised the different tracks of production and consumption in China over recent months, as evidenced by Tuesday’s data release.

This strong growth in outbound shipments looked to have continued into September, with data from the China Ports & Harbour Association showing 9 per cent growth in total container traffic over the first 12 days of this month, including a 16.5 per cent rise in international traffic.

Within industrial production, manufacturing grew by 6 per cent from a year earlier while mining grew by 1.6 per cent, respectively.

“Growth in industry and construction is likely to remain strong since fiscal spending is set to be ramped up further during the rest of the year and the recent surge in industrial profit growth has also boosted the prospects for manufacturing investment,” said Julian Evans-Pritchard, senior China analyst at Capital Economics.

Taken together, the economy is on track to return to its pre-virus growth rate before the end of the year.

Source – South china mornign post

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