Chinese Factory, Retail Sector Growth Stumbles Over COVID-19 Outbreaks

  • Economic Indicators News
Chinese Factory, Retail Sector Growth Stumbles Over COVID-19 Outbreaks
Credit: © Reuters.

By Gina Lee – China's factory and retail sectors hit a bump on the road to economic recovery in August thanks to COVID-19 outbreaks and supply disruptions.

Data from the National Bureau of Statistics (NBS) released earlier in the day said industrial production grew 5.3% year-on-year, its weakest pace since July 2020. The growth was also lower than both the 5.8% in forecasts prepared by and July’s 6.4% growth.

Chinese industrial production year to date rose 13.1% year-on-year, down from July’s 14.4% growth.

Meanwhile, retail sales grew 2.5% year-on-year, a sharp drop from both the 7% growth in forecasts and July’s 8.5% growth.

"Recent economic data reflected the overall demand is still weak in the economy, vulnerable to sporadic COVID-19 outbreaks, but some sectors have been overheated, judging from the persistently high commodity prices," Hwabao Trust economist Nie Wen told Reuters.

"Policymakers will face a dilemma in terms of how to respond to a situation like this."

Supply chain bottlenecks, semiconductor shortages, curbs on high-polluting industries and the crackdown on the property sector also contributed to declining growth.

Although the world's second-largest economy has largely recovered from 2020’s COVID-19-induced slump, fresh outbreaks have put a dent in the pace and raised expectations of further government support.

"We had been expecting services activity to rebound strongly in September as the COVID-19 situation was back under control," Capital Economics Senior China Economist Julian Evans-Pritchard told Reuters. However, the latest outbreak in Fujian province could derail the recovery further, he added.

NBS data also said fixed-asset investment grew 8.9% year-on-year, down from the 9% growth in forecasts and July’s 10.3% growth.

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