The rebound from the repercussions of COVID & heatwaves was sped up in August thanks to a faster-than-expected increase in factory output as well as retail sales, but the future was clouded by a worsening property downturn.
The world’s second-best performing economy is showing signs of growth thanks to the better-than-expected numbers, which come after it narrowly avoided contracting in the June quarter and marginally improved recovery predictions for the remainder of the year.
As reported by the National Bureau of Statistics, industrial output increased 4.2% in August compared to the same month last year, which is the quickest rate since March (NBS).
That exceeded both the 3.8% expansion in July and the 3.8% gain anticipated by analysts in a poll.
Retail sales increased 5.4% from a year earlier, outpacing expectations of 3.5% growth plus the 2.7% gain in July, and growing at the quickest rate in six months.
According to Julian Evans-Pritchard, a Chinese economist at Capital Economics, this is because there is a lower baseline for comparison. After all, the Delta wave was already having an impact on the economic commotion in August 2021.
Evans-Pritchard does not anticipate the strength to continue into September, even though the positive data lessens some of the doom that had been cast over the lethargic recovery as a result of negative trade data and slow credit growth.
The current viral wave may have crested, he claimed, but activity is expected to be lacklustre in the upcoming months due to the worsening real estate slump, decreasing exports, and recurrent COVID-19 disruptions.
In the first 8 months of 2022, fixed asset investment increased by 5.8% compared to the same time the previous year, above the forecasted 5.5% increase and exceeding the growth of 5.7% from January to July.
Fu Linghui, a spokeswoman for NBS, said in remarks made in response to the report that China’s economic growth in August was “hard-won,” thanks to helpful measures, but he cautioned that the rebound was fragile and that global economic conditions were still challenging.
Despite the positive activity data, China’s real estate market shrank in August as losses from housing prices, investments, and sales were extended.
As per calculations based on government statistics, real estate investment decreased 13.8% in December, the fastest rate since December 2021.
The annual decrease in new home prices accelerated from 0.9% in July to 1.3% in August, the quickest decline since August 2015.
China’s real estate industry, which was once a major engine of economic expansion, has been thrown from crisis to crisis from mid-2020 as a result of regulators’ intervention to reduce developers’ excessive leverage.
Policymakers are currently frantically trying to avert a protracted downturn as a result of the housing market difficulties weighing on the second-largest economy in the world.
Building on the 23.1% fall witnessed in the first seven months, the first eight months of the year had seen a 23.0% decrease in property acquisitions by floor area in comparison to the same time last year, showing furthermore brittle demand.
Low consumer and corporate confidence prevent businesses from expanding and hiring additional personnel. The unemployment rate measured by national surveys decreased slightly from 5.4% in July to 5.3% in August. After reaching a peak high of 19.9% in July, youth unemployment remained high at 18.7%.
Since late May, policymakers have announced more than 50 measures to support the economy, and they have emphasised that this quarter is a crucial one for taking action.
Before the governing Communist Party’s Congress, which begins on October 16, when President Xi Jinping is expected to defy convention and achieve a third leadership term, analysts anticipate more interruptions from tougher COVID-19 regulations in September.
A new financial leadership team, which is set to take office in the following year, will be faced with several difficulties, including how to reverse the zero-COVID policy, which many believe is unsustainable, the real estate crisis, and escalating diplomatic tensions with Washington.