Chinese consumer and factory activity improving but still weak


BEIJING — China’s consumer spending and factory output edged up in August but are still weak, official data showed Friday, and forecasters warned that the second-largest economy is vulnerable to repeated city shutdowns to combat the virus outbreaks.

Home sales fell while prices fell slightly, adding to a drop in real estate activity under pressure from a government campaign to control soaring corporate debt that sparked an economic crisis in mid- 2021.

“The Chinese economy held up better than expected last month, but momentum has weakened further,” Julian Evans-Pritchard of Capital Economics said in a report. “September is looking even worse.”

Chinese leaders are trying to prop up economic growth that has slumped to 2.5% year on year in the first six months of 2022, less than half the official target of 5.5%, without major stimulus spending which could drive up debt and housing costs.

Economists say China’s economic growth this year could be less than 3%, less than half of last year’s 8.1%. The ruling Communist Party has stopped talking about being able to meet its 5.5% target.

Retail sales, one of China’s most important economic drivers, rose 5.4% in August from a year earlier, double the 2.7% growth in the previous month, according to the National Bureau of Statistics. This exceeded forecasts by 3.3%.

Factory output rose 4.2% from 3.8% in July, but remains weak by Chinese standards. Investment in factories, real estate and other fixed assets edged up to 5.8% from 5.7% the previous month.

China’s rebound from the pandemic has been disrupted by virus measures that shut down Shanghai and other industrial hubs from March. Those restrictions have been eased, but controls have been temporarily reimposed in the southern business center of Shenzhen and other cities to control outbreaks.

The economy “remains at risk from future lockdowns,” ING’s Robert Carnell said in a report.

The ruling party is sticking to a “zero COVID” strategy that calls for keeping the disease out of China by isolating each case. Officials responded to complaints about rising economic costs and social disruption by warning that lifting controls would lead to outbreaks that would be more costly and destructive.

Home sales fell 30.3% from a year earlier, reflecting disruption as builders face tighter limits on their use of debt. Many buyers seem reluctant to spend after thousands of already paid-for apartments remained unfinished, forcing local authorities in some areas to step in and try to complete them.

Prices paid for new homes fell 0.3% from July.

“As a major pool of Chinese household wealth, this won’t help encourage spending,” Carnell said. “These numbers will likely remain a stain on the economic landscape for quite some time.”


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