August was marked by sweltering temperatures in parts of China, leading to temporary power rationing in some areas. Pictured here on August 24, 2022, the skyline of the central city of Chongqing is shown with the lights partially turned off to conserve energy during a heat wave.
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BEIJING – China on Friday released data that showed a rebound in growth in August from the previous month. The data also came in above expectations across the board.
Retail sales grew 5.4% in August from a year ago, the fastest since January-February this year, according to figures from the National Bureau of Statistics. August retail sales beat Reuters forecasts for 3.5% growth.
Among the overall encouraging data, retail sales registered the biggest surprise, buoyed by passenger car sales and helped compared to the low growth last August, noted Hao Chu, chief economist at Guotai Junan International. Retail sales rose 2.5% year over year in August 2021.
This year, restaurant sales have recovered from the slump caused by Covid to rise 8.4% in August compared to last year, while auto and food sales have also grown significantly. This helped retail sales grow in the year to August by 0.5% compared to last year.
Cosmetics and home furnishing were among the few categories that showed a decline in sales in August from last year.
Online physical merchandise sales rose 12.8% in August from a year ago, faster than their 10.1% growth in July, according to CNBC calculations of official data.
Industrial production rose 4.2% in August from a year earlier, topping the 3.8% increase estimated in a Reuters poll of analysts. Despite the annual decline in key categories such as cement and steel, automobiles once again proved to be a bright spot, with passenger car production up 33%.
Investment in fixed assets for the first eight months of the year rose 5.8% above the 5.5% increase forecast by Reuters. Manufacturing investment grew 10% compared to the same period last year. Infrastructure investment grew a little faster than it did in July, year-over-year.
Real estate investment for the year is down further from August, down 7.4% from the same period last year versus a 6.4% drop in the year as of July.
On Friday, National Bureau of Statistics spokesman Fu Lingwei told reporters more than once that insufficient domestic demand is a big problem. He cited more investment in infrastructure and manufacturing as ways to support growth.
Fu also said the COVID-19 outbreak and severe weather since August have affected the construction of some projects, slowing investment growth.
The unemployment rate for youth aged 16-24 fell to 18.7% in August. It remained well above the city’s overall unemployment rate, which was 5.3% in August, down slightly from the previous month.
China’s CPI has fallen from two-year highs to show a 2.5% year-over-year increase in August. But excluding food and energy, the index rose only 0.8%, reflecting again weak demand.
Fu said that stabilizing the property market needs more work, and that the industry is still in a “downward period” despite some positive changes, according to CNBC’s translation of Mandarin comments.
The Chinese economy has remained under pressure in part due to Covid controls, which notably Tens of thousands of tourists were stranded on the tropical island of Hainan in August.
The summer month was also marked by very high temperatures in parts of China, which led to this. Temporary power rationing in some areas.
“In general, the national economy has withstood the impacts of multiple unexpected factors and has continued the momentum of recovery and growth with key indicators showing positive changes,” the National Bureau of Statistics said in a press release. “However, we must realize that the international environment is still complex and dangerous and that the basis for domestic economic recovery is not solid.”
Export growth slowed to 7.1% y/y in August, This suggests that China’s growth engine may be waning as global demand falters. Domestic demand remained weak, with imports up just 0.3% from a year ago.
“We expect the increase from exports to continue to slow in the next several months due to the impact of a higher base and declining global demand,” said Bruce Pang, chief economist and head of research for Greater China at JLL.
He said the policy should focus on boosting domestic demand, mainly through coordinating fiscal and industrial policies, while monetary policy plays a supportive role. “We believe that massive additional stimulus will not be around the corner, but adjusting and following up on current policy measures,” he said.
Correction: This story has been updated to reflect infrastructure investment growing faster in August than in July, and that real estate investment fell 6.4% in the first seven months of the year compared to last year.