China’s Economy Picks Up Speed as Shoppers, Moviegoers Return
China’s economic recovery accelerated in August, with retail sales, the last holdout among the economy’s major components, returning to pre-coronavirus levels by showing their first month of growth this year.
Other major indicators, including factory production, investment and property activity, all gathered pace, China’s state-run statistics bureau said Tuesday, signaling a robust rebound for the world’s second-largest economy. The main official measure of joblessness, the urban surveyed unemployment rate, edged down to 5.6%, the lowest since it stood at 5.3% in January, when the coronavirus began to affect hiring. That is comfortably below the government’s targeted ceiling of around 6% for the year and down from the record high of 6.2% in February.
The economic rebound has been supported by recovering global demand for Chinese-made goods and Beijing’s measures to boost growth. Gross domestic product in the second quarter was up 3.2% from a year earlier, following a historic 6.8% decline the quarter before.
But consumption was conspicuously not among the robust measures–notably, industrial production and government-led infrastructure investment–in part because Beijing focused on restarting factories and businesses. In the U.S., where the federal government delivered stimulus checks and supplemental unemployment benefits, retail sales returned to year-over-year growth in June, and added to their gains in July.
Lagging retail sales in China had raised concerns among economists about a “two-track” recovery–a worry for policy makers given the service sector’s increasing role in driving China’s overall economy. Economists had predicted a return to year-over-year growth in retail sales for months, but were repeatedly wrong. For August they forecast a bare-minimum 0.1% rise, and were finally wrong on the low side: Sales were up 0.5% from a year earlier, a strong improvement from July’s 1.1% drop.
Retail sales have benefited from the lifting of lockdowns across the country. While economic activity in many parts of China was starting to return to normal by April, subsequent local outbreaks kept officials’ vigilance high and restrained consumer confidence.
Now, with no local cases reported in weeks, shopping malls, restaurants and gyms across the country are packed with consumers again. Movie theaters–the last major holdout among public venues–reopened in late July. During the last 10 days of August, official data showed box-office revenue returning to 90% of year-earlier levels.
“The retail sales data indicate that pent-up consumer demand was released in August when social-distancing rules were further relaxed,” said Larry Hu, an economist with Macquarie Group.
High-frequency data also showed rail and air travel inching closer to pre-virus levels in August, as families seized the last chance to travel before the new school year began in September. With the pandemic still ravaging other parts of the world and restricting international flights, many Chinese tourists have altered their plans to travel domestically, Fu Linghui, a spokesman for the statistics bureau, said in a Tuesday briefing. Scenic spots were particularly crowded in August, further evidence of the recovery in domestic consumption.
August industrial production was up 5.6% from a year earlier, the National Bureau of Statistics said, beating July’s 4.8% and the 5.2% forecast of economists polled by The Wall Street Journal. January-August fixed-asset investment was down 0.3% from a year earlier, narrowing the January-July decline of 1.6% and matching economists’ forecast.
But the jobs news was mixed. While the urban surveyed unemployment rate was down, the rate for fresh graduates continued to rise in August, defying hopes for an improvement after a jump in July, the traditional graduation month in China, said Mr. Fu, the statistics bureau spokesman. He didn’t give specific numbers for either month.
Mr. Fu said that if August’s economic trend line continues through September, the third-quarter GDP figure would likely be a significant improvement on the second quarter’s 3.2%. Following Tuesday’s better-than-expected data release, private-sector economists have begun raising their growth forecasts.
Ding Shuang, an economist with Standard Chartered Bank, sees third-quarter growth accelerating to roughly 6%, on par with China’s pre-coronavirus trajectory.
ANZ, an investment bank, bumped up full-year GDP-growth to 2.1% from a previous prediction of 1.8%, citing the robust service-sector recovery and increasing hopes China will have an effective coronavirus vaccine this year.
Source: Dow Jones