China’s retail sales slipped in July, dashing expectations for a modest rise, as consumers in the world’s second-largest economy failed to shake off wariness about the coronavirus.
Meanwhile, the recovery in the factory sector struggled to gain momentum.
Asian markets pulled back on Friday following the disappointing set of economic indicators, which raised concerns about the fragility of China’s emergence from coronavirus.
China’s recovery had been gathering pace after the pandemic paralyzed huge swathes of the economy as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.
However, the data from the National Bureau of Statistics on Friday showed weaker-than-expected year-on-year industrial output growth and retail sales extending declines into a seventh straight month in July. That was slightly offset by firmer property investment, which showed a recent stimulus was supporting construction activity.
“Looking ahead, we expect a renewed acceleration in infrastructure investment in the coming months as planned government bond issuance continues to ramp-up,” said Martin Rasmussen, China Economist at Capital Economics.
“This should drive a further rebound in industry and construction, helping to absorb labor market slack, indirectly shore up consumption and keep the economic recovery on track.”
Industrial output grew 4.8 percent in July from a year earlier, in line with June’s growth but less than forecasts for a 5.1-per-cent rise.
Retail sales dropped 1.1 percent year on year, missing predictions for a 0.1-per-cent rise and following a 1.8-percent fall in June.
The decline in retail sales was broad-based with garments, cosmetics, home appliances and furniture all worsening from June.
A key exception was auto sales, which surged 12.3 percent, turning around an 8.2-per-cent fall in June.
China’s economy returned to growth in the second quarter after a deep slump at the start of the year, but unexpected weakness in domestic consumption weighed on momentum.