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China’s economy lost more steam in November as factory output slowed and retail sales extended declines, both missing forecasts and clocking their worst readings in six months, hobbled by surging COVID-19 cases and widespread virus curbs.

The data suggested a further deterioration in economic conditions as lockdowns in many cities, a property-sector crunch and weakening global demand pointed to a bumpy road ahead even as Beijing ditched some of the world’s toughest anti-virus restrictions.

Industrial output rose 2.2 percent in November from a year earlier, missing expectations for a 3.6 percent gain in a Reuters poll and slowing significantly from the 5 percent growth seen in October, the National Bureau of Statistics (NBS) data showed on Thursday. It marked the slowest growth since May when Shanghai was under lockdown, partly due to disruptions in key manufacturing hubs Guangzhou and Zhengzhou.

Retail sales fell 5.9 percent amid broad-based weakness in the services sector, also the biggest contraction since May. Analysts had expected the gauge of consumption to shrink 3.7 percent, accelerating from a 0.5 percent dip in October.

In particular, sales in the contact-intensive catering sector fell 8.4 percent from a year earlier, accelerating from the 8.1 percent decline in October.

Meanwhile, automobile production slumped 9.9 percent, swinging from an 8.6 percent gain in October.

“The weak activity data suggest that the policy needs to be eased further to revive the growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increased size of the MLF rollover this morning is in line with the overall easing policy tones. Looking ahead, we also forecast that the rates for MLF will be lowered by 10bps next Q1.”

China’s central bank ramped up cash injections into the banking system on Thursday and held interest rates on the medium-term policy loans, or MLF, to keep liquidity conditions ample.

The world’s second-largest economy has been depressed by its zero-COVID policy, as tight movement controls hampered consumption and production. Other headwinds the country faces are its property market slump, global recession risks and geopolitical uncertainties.

Property investment fell 19.9 percent year-on-year, the fastest pace since the statistics bureau began compiling data in 2000, according to Reuters calculations based on data from the NBS.

Policymakers have rolled out support for the sector on almost all fronts, including credit lines from banks, bond financing and equity financing, but analysts said such effects have yet to be seen as home sales still remained weak.

Fixed asset investment expanded 5.3 percent in the first 11 months of the year, versus expectations for a 5.6 percent rise and growth of 5.8 percent during January-October.

Hiring remained low among companies wary about their finances. The nationwide jobless rate rose to 5.7 percent in November from 5.5 percent in October. Youth unemployment dipped to 17.1 percent from 17.9 percent in October.

“December data might be even worse – that’s not because everything is getting worse in China, because the end of the tunnel is coming,” said Alicia Garcia-Herrero, chief economist of Asia-Pacific at Natixis.

“I am expecting a big collapse in industrial production in December. This will be the immediate consequence of the opening up,” she said, downgrading gross domestic product (GDP) growth in the fourth quarter to 2.8 percent from 3 percent previously.

China has set out plans to expand domestic consumption and investment, state media said on Wednesday, as policymakers face multiple challenges following abrupt relaxations of harsh COVID-related restrictions, which are expected to usher in a surge of infections.

That would hit businesses and consumers, while a weakening 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 full year, well below the official target of “around 5.5 percent”.

All eyes are on the closed-door annual Central Economic Work Conference, when Chinese leaders gather to set next year’s economic agenda. They will likely map out more stimulus steps, eager to underpin growth and ease disruptions caused by a sudden end to COVID-19 curbs, policy insiders and analysts said.


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