China’s factory, retail sectors skid as COVID hits growth

  • China’s industrial output growth is slower than expected.
  • The contraction in retail sales deepens.
  • Property investment falls the most in two decades.
  • Rising unemployment rates across the country
  • Analyst – Near-term outlook darkens after easing of COVID

BEIJING, Dec 15 (Reuters) – China’s economy lost further steam in November as factory output slowed and retail sales fell, both missing forecasts and staving off their worst reading in six months, due to the COVID-19 Due to increasing cases of and widespread virus containment.

The data suggested a further deterioration in economic conditions as lockdowns in many cities, a crisis in the property sector and weakness in global demand pointed to the road ahead even as Beijing announced large-scale and rare Some of the world’s toughest anti-virus restrictions were lifted after public protests.

Industrial production rose 2.2 percent from a year earlier in November, missing expectations for a 3.6 percent rise in a Reuters poll and significantly slower than the 5.0 percent growth seen in October, the National Bureau of Statistics ( NBS) data showed on Thursday. It marked the slowest growth rate since May, partly due to disruptions in the key manufacturing centers of Guangzhou and Zhengzhou.

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Retail sales fell 5.9 percent amid broad-based weakness in the services sector, the biggest contraction since May. Analysts had expected the consumption gauge to contract 3.7 percent, faster than a 0.5 percent decline in October.

In particular, sales in the contact catering sector fell 8.4% from a year earlier, which was faster than the 8.1% decline in October.

Meanwhile, automobile production fell to 9.9 percent from an 8.6 percent increase in October.

China’s yuan fell against the dollar on Thursday, as data weighed on investor confidence.

“The weak activity data suggests that further policy easing is needed to restore growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increased size of the MLF rollover this morning is in line with the overall dovish policy tones. Looking ahead, we also forecast MLF rates to cut by 10bps in next Q1.”

China’s central bank on Thursday boosted cash injections into the banking system and kept interest rates on medium-term policy loans, or MLFs, unchanged to keep liquidity conditions adequate.

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The world’s second-largest economy has been depressed by its zero-covid policy, as strict movement controls hamper consumption and production. Other major issues facing the country are its declining real estate, risks of global recession and geopolitical uncertainty.

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According to Reuters calculations based on NBS data, property investment fell 19.9% ​​year-on-year, the slowest rate since the statistics bureau began compiling data in 2000. It is fast.

Policymakers have launched support for the sector on almost all fronts, including credit lines from banks, bond financing and equity financing, but analysts say the impact is yet to be seen as home sales remain subdued. is weak

Fixed asset investment rose 5.3 percent in the first 11 months of the year, compared with expectations for a 5.6 percent rise in January-October and a 5.8 percent rise.

Employment remained low at companies cautious about their finances. The nationwide unemployment rate rose to 5.7 percent in November from 5.5 percent in October. Youth unemployment fell to 17.1 percent from 17.9 percent in October.

“December’s data could be worse – not because everything is going bad in China, because the end of the tunnel is coming,” said Alicia García Herrero, chief economist for Asia-Pacific at Natex. said

“I expect a big slowdown in industrial production in December. That will be an immediate consequence of the opening,” she said, bringing fourth-quarter GDP growth down to 2.8 percent from 3 percent.

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China has set plans to boost domestic consumption and investment, state media said on Wednesday, as policymakers face a number of challenges after the sudden easing of strict restrictions related to COVID-19, which is expected to increase infections. Is.

This will affect businesses and consumers, while a weak global economy hurts Chinese exports.

China’s economy grew just 3 percent in the first three quarters of this year and is expected to stay around that rate for the rest of the year, well below the official target of “around 5.5 percent.”

All eyes are on the annual closed-door Central Economic Work Conference, when Chinese leaders gather to set the economic agenda for next year. Policy insiders and analysts said they are likely to map out further stimulus measures, which are keen to slow growth and ease the disruption caused by the sudden end of the COVID-19 containment. .

($1 = 6.9593 Chinese Yuan)

Additional reporting by Liz Li, Liangping Gao and Kevin Yao; Edited by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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