China’s domestic spending slows as economy recovers from virus

Residents walk along a retail street in Wuhan on April 8. (AP pic)

BEIJING: China’s retail sales dropped in July, official data showed Friday, indicating that sluggish consumer spending could hold up the country’s recovery from the coronavirus outbreak.

Retail sales – a key indicator of consumer sentiment – shrunk by 1.1% on-year, falling short of forecasts and suggesting many are still reticent about going out to spend time and money, even as China appears to have the virus largely under control.

The latest data follows a drop of 1.8% on-year for retail sales in June.

Bloomberg analysts had predicted sales would recover to a modest 0.1% growth.

The catering industry remained particularly badly hit, with sales down 11%.

The retail sector occupies an increasingly crucial role in China’s economy as leaders look to consumers, rather than trade and investment, to drive growth.

A domestic consumption pick-up is especially needed as external demand weakens while other countries continue battling the pandemic.

A spokesman for the National Bureau of Statistics Fu Linghui said the data showed “a trend of steady recovery”.

Industrial production grew by 4.8% in July – the same level as the previous month, but below predictions from Bloomberg analysts of 5.2% growth.

China is working to bounce back from a historic economic contraction in the first quarter caused by the virus, which had shut down most activity and forced people across the country to stay home.

The coronavirus – which first emerged in the city of Wuhan late last year – has since shut businesses and destroyed millions of jobs globally.

As several of the world’s major economies plunge into recession, China’s data suggests it is generally recovering quicker, as the first to be hit by Covid-19 and one of the first to recover.

China’s GDP expanded 3.2% in April-June, smashing expectations and a massive improvement on the 6.8% contraction in the first quarter.