Employees working on an air conditioner production line at a Midea factory in Guangzhou, China.
Jade Gao | AFP | Getty Images
BEIJING — China released July data well below expectations as the housing crisis and Covid controls dampened growth.
Retail sales rose 2.7% in July from a year ago, the National Bureau of Statistics said Monday. That’s well below the 5% growth predicted by a Reuters poll, and down from 3.1% growth in June. Within retail sales, food service, furniture and construction-related categories posted declines.
Automobile sales, one of the largest categories by value, rose 9.7%. The gold, silver and jewelry category saw its sales rise the most, up 22.1%. Online sales of physical goods rose 10% year-on-year, faster than in June, according to CNBC calculations of official data.
Industrial production rose 3.8%, also missing expectations of 4.6% growth and a decline from the 3.9% rise the previous month.
Capital investment for the first seven months of the year rose 5.7% from a year ago, missing expectations for a 6.2% growth.
Investment in real estate declined at a faster pace in July than in June, while investment in manufacturing slowed its pace of growth. Infrastructure investment increased at a slightly faster pace in July than in June. Capital investment data is only published on an annual basis to date.
“This year, the real estate market as a whole has shown a downward trend,” Fu Linghui, a spokesperson for the National Bureau of Statistics, told reporters in Mandarin, according to a CNBC translation.
“Real estate investment has declined and may have had some impact on associated consumption,” he said.
Youth unemployment is on the rise
While the overall unemployment rate in cities fell to 5.4% in July, youth unemployment remained persistently high.
The unemployment rate for young Chinese aged 16 to 24 was 19.9%. That’s the highest on record, according to Wind data dating back to 2018.
Fu attributed the high level of youth unemployment to the impact of Covid on business operations and their ability to hire.
In particular, he noted how the service sector, where young people typically account for more jobs, has been recovering quite slowly. Fu also pointed to the current preference of young people for more stable jobs.
Stable jobs in China generally include those in state-owned companies rather than positions in start-ups or small businesses.
“The national economy has maintained the momentum of the recovery,” the statistics office said in a statement. But he warned of rising “risks of stagflation” globally and said “the foundations for the recovery of the national economy still need to be consolidated”.
Analyst forecasts for July were expected to show a pick-up in economic activity from June as China put behind it the worst of this year’s Covid-related lockdowns, particularly in metropolitan Shanghai.
Exports remained robust last month, rising 18% year-on-year in US dollar terms despite growing concerns over falling global demand. Imports lagged, climbing just 2.3% in July from a year earlier.
However, China’s massive real estate sector came under renewed pressure this summer. Many homebuyers have halted their mortgage payments to protest delays by developers in building homes, which are typically sold before completion in China.
Deteriorating confidence jeopardizes future developer sales – and an important source of cash flow.
Statistics spokesman Fu described the construction delays as region-specific.
He said the real estate market is “in a phase of building a bottom” and that its impact on the economy will “gradually improve”.
Fu said in response to a separate question that once Covid is under control, pent-up consumer demand will be unleashed.
The potential for a Covid outbreak remained another drag on sentiment. A wave of infections in tourist destinations, particularly the island province of Hainan, has stranded tens of thousands of tourists this month.
The local situation reflects the significant gap between the objectives set at the start of the year and the ensuing reality. Hainan had set a GDP target of 9%, but was only able to grow 1.6% in the first six months.
Similarly, domestically, China’s GDP grew only 2.5% in the first half of the year, well below the annual target of around 5.5% set in March.
Asked about the target on Monday, Fu did not discuss it specifically. But he pointed to a host of challenges to growth at home and abroad, including growing uncertainties overseas.
Looking ahead, Fu said China’s economy “still faces many risks and challenges” to maintain its recovery and keep operations within a “reasonable range”.
China’s top leaders indicated at a meeting in late July that the country could miss its GDP target for the year. The meeting did not announce any large-scale stimulus ahead, while noting the importance of price stabilization.
The country’s consumer price index hit a two-year high in July as pork prices rebounded.
Ahead of Monday morning’s data release, the People’s Bank of China unexpectedly cut two of its lending rates — both for the first time since January, according to Citi.