China’s slowdown is exacerbated as the Covid epidemic reveals consumer weakness


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China’s economic slowdown worsened in August as the coronavirus outbreak revealed a long-standing weakness in consumer spending and cast more doubts on the country’s growth prospects.

Retail rose just 2.5 percent in August from a year earlier, well below economists ’forecast of 7 percent growth and the slowest growth in 12 months.

Industrial production, which was one of the main engines behind China the world is winning the recovery in 2020, they also missed targets for adding 5.3 percent, official data showed on Wednesday.

The figures raise concerns about the loss of momentum in the Chinese economy, with recent floods, regulatory interventions, new coronavirus infections and a slowdown in real estate that have lowered growth expectations.

The disruption hit consumer activity hard, lagging behind the country’s wider recovery during the pandemic as households remained cautious. Retail sales of restaurants and restaurants fell 4.5 percent, the first decrease since November 2020, HSBC analysts noted.

“It turned out to be a challenge than expected to boost retail after Covid,” said Carlos Casanova, a senior economist at UBP.

Coronavirus epidemics in recent months, originally focused on cases of the Delta variant of Covid-19 in Nanjing in July, have reduced travel and consumption after authorities introduced preventive measures.

Dozens of new cases were reported last week in the southern province of Fujian, where authorities closed schools.

“To the extent that China maintains a policy of zero tolerance towards Covid-19, this leaves their economy vulnerable to any possible local epidemic as it will have to be shut down,” Casanova added. “It will turn into a drop in consumption and disruptions in the supply chain.”

Goldman Sachs analysts, who last month lowered growth forecasts for China’s actual GDP in the third quarter at 2.3 percent from 5.8 percent, it also indicated a “significant slowdown” on an industrial scale, including electricity generation and smelting of ferrous metals.

Weaker economic indicators and expectations coincided with a slowdown in the country’s property sector, which according to Bank of America accounts for about 28 percent of economic activity when both direct and indirect contributions to growth are taken into account.

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Environmental crisis Evergrande, the country ‘s most indebted developer with hundreds of projects nationwide, has focused on Beijing’ s efforts over the past year to reduce leverage in the sector.

Weak data spurred a debate on the possibility of further policy interventions, after the National Bank of China released more liquidity in the banking system in July by reducing the reserve requirement rate.

“We don’t think policymakers will significantly ease the overall macro policy stance,” said Tommy Wu of Oxford Economics. “But we expect Beijing to try to avoid a sharp slowdown and to be more willing to take measures to support growth than it has been so far this year.”

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