August industrial production, retail sales
August was marked by extremely hot temperatures in parts of China, causing temporary power rationing in some areas. Pictured on August 24, 2022, the central city of Chongqing is seen with the lights partially turned off to save energy during the heat wave.
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BEIJING — China released data on Friday showing a pickup in growth in August from the previous month. The data also exceeded expectations across the board.
Retail sales rose 5.4% in August from a year ago, the fastest since the January-February period this year, according to figures released by the National Bureau of Statistics. August retail sales beat Reuters forecasts for 3.5% growth.
Among the generally encouraging data, retail sales took the biggest surprise, boosted by passenger car sales and helped from weak growth last August, said Hao Zhou, chief economist at Guotai Junan International. Retail sales were up 2.5% year-on-year in August 2021.
This year, restaurant sales recovered from a Covid-induced slump to rise 8.4% in August from a year ago, while auto and food sales also rose by significantly. That helped retail sales for the year to August rise 0.5% from a year ago.
Cosmetics and home furnishings were among the few categories showing lower sales in August compared to a year ago.
Online sales of physical goods rose 12.8% in August from a year ago, faster than July’s 10.1% growth, according to CNBC’s calculations of official data.
Industrial production rose 4.2% in August from a year earlier, beating the 3.8% rise estimated in a Reuters poll of analysts. Despite a year-on-year decline in major categories such as cement and steel, automotive again proved to be a bright spot, with passenger car production up 33%.
Capital investment for the first eight months of the year rose 5.8%, above the 5.5% rise forecast by Reuters. Investment in the manufacturing sector increased the most, up 10% from the year-ago period. Year-to-date, infrastructure investment has grown at a slightly faster pace than in July.
Real estate investment for the year fell further in August, down 7.4% from the year-ago period, compared with a 6.4% decline for the year in July.
A demand problem
On Friday, National Bureau of Statistics spokesman Fu Linghui told reporters more than once that insufficient domestic demand was a significant problem. He pointed to more investment in infrastructure and manufacturing as ways to support growth.
Fu also said Covid outbreaks and extreme weather since August have affected the construction of some projects, slowing investment growth.
The unemployment rate for young people aged 16 to 24 fell slightly to 18.7% in August. It remained well above the overall unemployment rate in cities, which was 5.3% in August, down slightly from the previous month.
China’s consumer price index fell slightly from two-year highs to post a 2.5% year-on-year increase in August. But excluding food and energy, the index rose only 0.8%, again reflecting sluggish demand.
The collapse of the massive real estate sector also weighed on demand. A few weeks earlier, Chinese developer Country Garden described the property market as having “slid rapidly into a serious depression”.
Fu said stabilizing the real estate market needed more work and the industry was still in a “down period” despite some positive changes, according to a CNBC translation of the Mandarin remarks.
China’s economy remained under pressure in part because of Covid controls, which notably stranded tens of thousands of tourists on the tropical island of Hainan in August.
The summer month was also marked by extremely hot temperatures in parts of China, causing temporary power rationing in some areas.
“Generally, the national economy has weathered the impacts of multiple unexpected factors and maintained the momentum of recovery and growth with major indicators showing positive changes,” the National Bureau of Statistics said in a statement. A press release. “However, we should be aware that the international environment is still complicated and severe and the foundations for domestic economic recovery are not solid.”
Export growth slowed to 7.1% year-on-year in August, signaling that China’s growth engine may weaken as global demand weakens. Domestic demand remained weak, with imports increasing only 0.3% from a year ago.
“We expect the export momentum to continue to weaken over the coming months due to the high base effect and slowing global demand,” said Bruce Pang, chief economist and head of research for Greater China at JLL.
He said policy should focus on stimulating domestic demand, mainly by coordinating fiscal and industrial policies, while monetary policy plays a supportive role. “We believe massive additional stimulus will not be around the corner, but an adjustment and follow-up to existing policy measures,” he said.
Correction: This story has been updated to reflect that infrastructure investment grew at a faster rate in August than in July, and real estate investment fell 6.4% in the first seven months of the year compared to a year ago.