(Bloomberg) -- China’s economic recovery continued in July, with industrial growth growing at the same pace as June due to overseas demand, even as still weak domestic retail sales continued to undercut the rebound.
- Industrial output rose 4.8% in July from a year earlier, versus a median estimate of 5.2%. Retail sales fell 1.1%, compared to a projected 0.1% increase.
- The pickup in recent months hasn’t been large enough to totally erase the damage from the virus outbreak. Output and retail sales in the first seven months of this year were both still below where they were the same time last year, while fixed-asset investment was 1.6% lower in the period.
Key Insights
- Private consumption started to gain some strength in the month, and that was in part attributable to “a relaxation in inter-province group tours, the re-opening of cinemas in low-risk areas, and a likely rise in auto sales growth,” Nomura Holdings (NYSE:NMR) Inc. economists led by Lu Ting wrote in a report before the data release.
- For a sustainable recovery, China will need a strong rebound in private consumption as rising tensions with the U.S. and the possibility of a resurgent coronavirus both pose risks to the surprisingly strong external demand so far this year.
- The July data show that China’s recovery is still uneven, with consumption unable to keep up with the rebound in industrial output.
- The government has recently touted the so-called “dual circulation” development model, in which a more self-reliant domestic economy serves as the main growth driver.
- “We expect the sequential momentum of the growth recovery to weaken in H2 because of strong growth headwinds and elevated uncertainty, and believe Beijing cannot yet afford to stop policy easing,” Lu wrote.
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- The surveyed unemployment rate remained steady at 5.7%
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