China’s Industrial Production Picks Up, but Retail Sales Slow Down

  • Economic Indicators News
China’s Industrial Production Picks Up, but Retail Sales Slow Down
Credit: © Reuters.

By Gina Lee – China's industrial production grew faster than expected in November, with stronger energy production and moderating raw materials prices lending support. However, growth in retail sales slowed as fresh COVID-19 outbreaks led to tighter restrictive measures in the country.

Chinese data released earlier in the day showed that industrial production grew 3.8% year-on-year, above the 3.6% growth in forecasts prepared by and the previous month’s 3.5% growth. However, Chinese industrial production in the year to date grew 10.1% year-on-year, lower than October’s 10.9% growth.

The data also showed that retail sales grew 3.9% year-on-year, lower than the 4.6% growth in forecasts prepared by and October’s 4.9% growth. Fixed asset investment grew 5.2% year-on-year, also lower than the 5.4% growth in forecasts prepared by and the previous month’s 6.1% growth.

The largely disappointing data emphasized the headwinds faced by the world’s second-largest economy’s recovery. These include wobbles in the property sector and COVID-19 outbreaks leading to tight restrictive measures and reduced consumer spending.

"The economy remained quite weak in November. Domestic consumption weakened further, which is driven by the zero-tolerance policy that hurts the service sector and the continued slowdown in the property sector," Pinpoint Asset Management chief economist Zhiwei Zhang told Reuters.

Some analysts expect China’s fourth-quarter gross domestic product growth to drop below 4% from the third quarter’s 4.9% growth. However, they added that the full-year growth could still be around 8%, which would exceed the official target of over 6%.

All this prompted the government to increase support, with the country’s top leaders pledging to focus on stabilizing the economy and keeping growth within a reasonable range in 2022 at a meeting last week. They also vowed to prioritize stimulus in 2022, ahead of the 20th Communist Party Congress,

The People’s Bank of China also cut the amount of cash banks must hold in reserve last week, the second such move in 2021. The central bank also cut the rates on its re-lending facility to support the rural sector and small firms.

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