China retail sales experienced a 6% drop in growth in July amid Covid-19’s emergence and natural disasters. Consumption accounts for more than half of China’s gross domestic product (GDP). Other economic indicators, including industrial production and fixed asset investment, declined as well.
China’s retail sales reached 3.4395 trillion yuan in August, up 2.5% year-on-year, according to the National Bureau of Statistics of China on the 15th. Compared with July, this is a 6 percentage point decline. Compared to the market forecast of 7%, it decreased by 4.5 percentage points. The level is the lowest in a year since 0.5 percent in August last year, when the epidemic was spreading.
Communications equipment, automobiles, clothing, footwear, and hats also decreased by 14.9%, 7.4%, and 6.0%, respectively.
Conversely, online retail sales increased 19.7% from the previous year. This is attributed to consumers opting to shop online rather than going to a store.
China’s retail sales dropped to 4.6% in December last year, but reached 34.2% in March this year due to a base effect. Since then, it has gradually declined, falling to 17.7% in April, 12.4% in May, 12.1% in June and 8.5% in July.
Chinese state media reported that further containment of the spread would not significantly affect consumption. There can be no certainty, however, about how such expectations will translate into actual retail data.
The industrial production in August was up 5.3 percent from the same month last year, down 1.1 percentage points from 6.4 percent in July. Also, it was below the market consensus of 5.8 percent. With a decline of 12.6%, the automotive manufacturing industry recorded the largest decline. Due to the global shortage of semiconductors and U.S. pressure on China, the supply of semiconductors has been cut off, which has affected the auto industry as well. The iron ore smelting and rolling industry decreased by 5.3 percent and the textile industry declined by 2.5 percent. From January through August, China’s cumulative fixed-asset investment (excluding rural areas) was 8.9 percent, down 1.4 percentage points from 10.3 percent last month. The investment in railroad, ship, aerospace, and other transportation equipment manufacturing increased by 30.2 percent.
Real estate investments in the domestic market accounted for 10.9%.
In January and February of this year, this indicator reached 38.3%. It draws a downward curve as the base effect gradually fades and the authorities’ regulations become stronger.