Retail sales in China grew far less than expected last month in another indication that the country’s economic recovery from the pandemic is slowing.
The National Bureau of Statistics (NBS) said retail sales increased 8.5% in July from a year ago, much lower than the forecast 11.5% rise and June’s 12.1% uptick.
“China’s economy has rebounded to its pre-pandemic growth levels, but the expansion is losing steam as businesses grapple with higher costs and supply bottlenecks,” Reuters said. “New COVID-19 infections in July also led to fresh restrictions, disrupting the country’s factory output already hit by severe weather this summer.”
Industrial production in the world’s second largest economy increased 6.4% year-on-year in July, the NBS reported, below analysts’ forecasts of a 7.8% gain after an 8.3% jump in June.
According to CNBC, the economic slowdown was “particularly apparent in individual Chinese consumer spending, despite authorities’ efforts to build up consumption as a driver of economic growth.”
Consumers cut back on spending across the board, whether it was on big-ticket items like cars or lower-cost products. The cosmetics sector was one of the slowest-growing categories, with sales growing just 2.8% in July from a year ago.
Online sales of physical consumer goods rose by 4.4% in July, far below an average of about 21% for the past five years.
An NBS spokesman said Chinese willingness to spend is increasing since spending per capita grew faster than disposable income in the first half of the year — up 17.4% and 12%, respectively.
But the retail sales and industrial production data came as a growing number of analysts have been cutting their third-quarter growth estimates for China. Goldman Sachs expects 8.3% GDP growth this year, down from 8.6% previously, while Nomura predicts 8.2% growth for the year, down from 8.9%.
The country’s gross domestic product expanded 7.9% in the second quarter from a year earlier.
“Given China’s ‘zero tolerance’ approach to COVID, future outbreaks will continue to pose significant risk to the outlook, even though around 60% of the population is now vaccinated,” said Louis Kuijs, head of Asia economics at Oxford Economics.