China’s Recovery Picks Up Speed on Rebound in Retail Sales By Bloomberg

(Bloomberg) — China’s economic recovery sped up in August, led by the first growth in retail sales since Covid-19 hit early in the year and an acceleration in industrial output.

• Retail sales gained 0.5% in August from a year earlier, while industrial production rose 5.6% in the period, the National Bureau of Statistics said Tuesday.
• In the first eight months of the year, retail sales fell 8.6% and industrial production increased 0.4%, the first time it’s risen this year. Fixed-asset investment shrank 0.3%.

Key Insights

• China’s economy has recovered from the Covid-19 slump early in the year, with industrial output rebounding due to fiscal stimulus and surprisingly strong exports. Pandemic rules compounded by job and income losses have curbed spending on entertainment and travel for most of this year. Consumption started to recover in August as China’s new Covid-19 cases dwindled toward double figures a day.
• “China’s economy has recovered steadily in August” as production and economic activities increase, the NBS said in a statement. “There’s still a pressing need to stabilize jobs, businesses and people’s livelihood and we need to strengthen the basis for a continued economic rebound.”
• The government has recently unveiled a new strategic plan which aims to boost domestic consumption and also make more critical technology at home amid rising geopolitical tensions and the possibility of a resurgence in the coronavirus.
• The gradual loosening of restrictions on services like movies may also provide a boost to consumer spending. China allowed theaters in areas with low virus risk to resume operations from July 20, though with limits. Morgan Stanley (NYSE:) estimates that China’s box office revenue will normalize in the fourth quarter.
• “With the strong economic recovery, policy normalization is under way,” Larry Hu, head of China economics at Macquarie Bank Ltd. in Hong Kong wrote in a report last week. “Further monetary easing is not necessary at this stage. But it’s still too early for policy tightening, given the economy is still running below its trend growth. The best description for the current policy stance is normalization.”

Get More

• The surveyed unemployment rate declined to 5.6%.
• The housing market has continued to boom, despite the government further tightening property policies. Home-price growth accelerated in August after a brief slowdown the previous month, indicating the curbs have done little to damp buyer enthusiasm. Funding for property rose 3% in the first eight months.
• Investment by state-owned firms slowed to 3.2% growth over the same period, while spending by private firms shrank 2.8%, the best result all year.

(Updates with chart, government comments and details on investment.)

©2020 Bloomberg L.P.