China's Covid recovery loses momentum as factory output slows


China’s Covid recovery loses momentum as factory output slows and retail sales miss expectations

China’s economic boom has hit a stumbling block, as factory output slowed in April and retail sales missed expectations.

Industrial production grew by 9.8 per cent year-on-year, slower than the 14.1 per cent rebound seen in March, according to the country’s National Bureau of Statistics.

And retail sales rose by 17.7 per cent – missing expectations of a 24.9 per cent climb, suggesting Chinese consumers are not splashing their cash at the rate which officials in Beijing may have hoped.

Slowdown: China's industrial production grew by 9.8 per cent year-on-year, slower than the 14.1 per cent rebound seen in March, according to the country's National Bureau of Statistics

Slowdown: China’s industrial production grew by 9.8 per cent year-on-year, slower than the 14.1 per cent rebound seen in March, according to the country’s National Bureau of Statistics

Despite being the epicentre of the coronavirus pandemic, China was the first major economy to recover from the crisis in the third quarter of last year.

China’s economy expanded by a record 18.3 per cent in the first quarter of this year, and is widely expected to grow by around 8 per cent for the full year. 

The UK’s output, meanwhile, was still lagging 5.9 per cent behind its pre-pandemic level even at the end of March.

But Fu Linghui, a spokesman for the National Bureau of Statistics, said: ‘The foundations for the domestic economic recovery are not yet secure.’

Year-on-year growth in catering sales, which includes restaurant dining, slipped from 91.6 per cent in March to 46.4 per cent in April.

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And retail data showed a particularly sharp drop in the growth of home appliance sales between March and April. Consumption has lagged the overall economic recovery in China, as retail sales contracted last year despite the growth in output.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said: ‘Sectors related to travel, leisure and entertainment employ a lot of people. The Covid uncertainty still holds these sectors back.’

While business investment in factories and machinery was up 19.9 per cent in the first four months of the year, compared to the same time in 2020, this was down from 25.6 per cent in the first three months of 2021.

Julian Evans-Pritchard, senior China economist at Capital Economics, said ‘momentum in output and consumption was a bit softer’ than at the start of the year. 

He added: ‘We think month-on-month growth will remain modest throughout the rest of this year as activity drops back to its pre-virus trend following the withdrawal in policy support.’

In the UK, the Bank of England is relying on consumer spending to super-charge the coronavirus recovery. 

Britons are thought to have squirreled away more than £200billion since the pandemic began, and the Bank’s economist Andy Haldane has said the country is like a ‘coiled spring’ ready to bounce back when restrictions ease.

The economy is expected to grow 7.25 per cent this year, according to the Bank, meaning it will be back at pre-pandemic levels by the end of 2021.

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