Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

China’s Recovery Weakens as Delta Outbreak Adds New Risks

Economic IndicatorsAug 15, 2021 10:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. China’s Recovery Weakens as Delta Outbreak Adds New Risks

(Bloomberg) -- China’s economic activity slowed more than expected in July, with fresh virus outbreaks adding new risks to a recovery already hit by floods and faltering global demand.

All the main data missed forecasts: retail sales expanded 8.5% in July from a year earlier, lower than the 10.9% predicted by economists; industrial output increased 6.4% versus the median estimate of 7.9%; fixed-asset investment grew 10.3% in the first seven months of the year, compared with a forecast of 11.3%. The unemployment rate rose to 5.1%.

China’s most widespread virus outbreaks since last year are weighing on an economic recovery that was already starting to soften into the second half of the year. The new virus cases since mid-July have been linked to the fast-spreading delta variant, prompting yet another round of targeted lockdowns, travel curbs and mass testing across the country.

The government’s aggressive moves to achieve a goal of zero Covid-19 infections could prove economically costly as consumers cut back on spending and supply chains get disrupted. Financial institutions like Nomura Holdings (NYSE:NMR) Inc., Goldman Sachs Group Inc (NYSE:GS). and JPMorgan Chase & Co. (NYSE:JPM) have already cut their growth projections for the third quarter and full year.

“July’s data suggest the economy is losing steam very fast,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group. “The resurgence of delta also adds extra risk to August’s activities.”

On a two-year average basis, which strips out statistical distortions from last year’s pandemic shutdowns, the data show a notable slowdown across the board:

Consumption, especially of services, is taking a knock from the targeted lockdowns. Authorities rushed to close tourist sites, call off cultural events and cancel flights to contain the virus outbreaks since last month.

Factory production faced a number of other constraints in July, including disruptions from heavy rain and floods, a continued shortage of computer chips, faltering demand and environmental curbs.

“Given the continuously evolving global situation of the epidemic, the increasingly complex and severe external environment, and the combined impact of sporadic local outbreaks of Covid-19 and natural disasters on the economy of some regions, the economic recovery is still unstable and uneven,” the National Bureau of Statistics said in a statement.

China‘s benchmark 10-year bond yield fell one basis point to 2.87% after earlier being about two basis points higher on the day. Futures contracts of the same tenor rose after the economic data release.

Adding to the economy’s woes are a slowdown in export growth, rising factory-gate prices and a real estate market that remains subdued given tighter restrictions on the property market. Local governments have also been slow to sell bonds this year, implying a moderate rollout of infrastructure spending.

The government has set a modest growth target of above 6% for this year. The slowdown may prompt economists to lower their growth forecasts for the year, which currently stand at a median of 8.5%, according to a Bloomberg survey.

Policy makers have signaled more targeted support for the economy as they look to cushion the recovery. At a Politburo meeting last month, where economic priorities for the second half of the year were laid out, top leaders pledged more steps to help struggling small businesses, a boost to fiscal spending and providing sufficient liquidity via monetary policy.

Economists now see the chance of more cuts to the reserve requirement ratio for banks in coming months after a surprise reduction in July. Some are even calling on the People’s Bank of China to lower interest rates, though the central bank said in its latest quarterly report that rates were at a “reasonable level” and vowed to avoid flooding the economy with stimulus.

On Monday, the central bank reduced liquidity by only rolling over 600 billion yuan ($92.7 billion) of the 700 billion yuan in 1-year loans that matured, while keeping the rate on the loans unchanged at 2.95%.

(Updates with comments from analysts, more details througout)

©2021 Bloomberg L.P.

China’s Recovery Weakens as Delta Outbreak Adds New Risks
 

Related Articles

Egypt PMI steady in Nov as input costs rise
Egypt PMI steady in Nov as input costs rise By Reuters - Dec 04, 2021 1

CAIRO (Reuters) - Egyptian non-oil activity in the private sector shrank for a 12th month in November as inflation expectations rose, causing new business orders to fall by their...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email