The Chinese economy lost steam further in November, with industrial production slowing and the decline in retail sales continuing. Both data missed forecasts and posted their worst results in six months, weighed down by rising COVID-19 cases and widespread coronavirus restrictions.
The data suggested a further deterioration in the economic situation, as lockdowns in many cities, the housing crisis and weakening global demand pointed to a bumpy road, despite Beijing dropping some of the toughest restrictions. of the world in the face of the pandemic following widespread and infrequent public protests.
Industrial production grew 2.2% in November from a year earlier, below expectations for a 3.6% rise according to a Reuters survey and slowing significantly from October’s 5.0% growth, they showed. on Thursday the data from the National Statistics Office. This is the slowest growth since May, due in part to disruptions in key manufacturing hubs in Guangdong and Zhengzhou.
Retail sales fell by 5.9% in a context of general weakness in the services sector, also representing the biggest contraction since May. Analysts had expected a 3.7% contraction in consumption, accelerating the 0.5% drop recorded in October.
In particular, sales in the catering sector, with great contact with the public, fell by 8.4% compared to the previous year, accelerating the 8.1% drop registered in October.
For its part, car production fell by 9.9%, compared to 8.6% in October.
The Chinese yuan depreciated against the dollar on Thursday as data weighed on investor sentiment.
“Weak activity data suggests that further policy easing is needed to revive growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increase in the volume of refinancing of the MLF (Chinese central bank’s medium-term loan program) this morning is in line with the general easing tone of monetary policy. Looking ahead, we also expect interest rates to the MLF are reduced by 10 basis points in the next first quarter”.
China’s central bank increased cash injections into the banking system on Thursday and maintained interest rates on medium-term loans, or MLFs, to maintain comfortable liquidity conditions.
The world’s second largest economy has been weighed down by its “zero contagion” policy against COVID-19, as strict travel controls hampered consumption and production. Other headwinds facing the country include its housing slump, global recession risks and geopolitical uncertainties.
Property investment fell 19.9% on-year, the fastest pace since the statistics office began collecting data in 2000, according to Reuters calculations based on data from the National Statistics Office.
Policymakers have rolled out support for the sector on almost every front, including credit lines from banks, bond financing and equity financing, but analysts said no such effects have yet been seen as home sales they are still weak.
Investment in fixed assets grew by 5.3% in the first 11 months of the year, against expectations of an increase of 5.6% and growth of 5.8% in January-October.
Hiring remained low among companies cautious about their finances. The national unemployment rate rose to 5.7% in November, from 5.5% in October. Youth unemployment fell from 17.9% in October to 17.1%.
“The December data could be even worse, but not because things are getting worse in China, but because the end of the tunnel is near,” said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis.
“I expect a big slump in industrial production in December. This will be the immediate consequence of the opening,” she said, cutting fourth-quarter GDP growth to 2.8% from 3% previously.
China has laid out plans to expand domestic consumption and investment, state media said on Wednesday, as currency leaders face multiple challenges after the abrupt relaxation of tough COVID-19-related restrictions, which is expected to trigger a surge in infections.
This would affect businesses and consumers, while the weakening of the world economy hurts Chinese exports.
China’s economy grew just 3% in the first three quarters of this year and is expected to remain around that rate throughout the year, well below the official target of “around 5.5%”.
All eyes are on the Central Economic Work Conference, which is held annually behind closed doors and where Chinese leaders meet to set the economic agenda for the coming year. They are likely to chart more stimulus measures, keen to shore up growth and ease the shocks caused by the sudden end of COVID-19 restrictions, according to analysts and economic policy experts.