by BEIJING, Dec 15 (Reuters) – China’s economy lost more momentum in November on a slowdown in industrial production and an expanded decline in retail sales, missing forecasts and posting its worst readings in six months, hampered by the increase in COVID-19 cases and the widespread limitation of the virus.
The data suggested further deterioration in economic conditions as lockdowns in many cities, a housing crisis and weakening global demand pointed to a bumpy road even as Beijing abandoned some of the world’s toughest virus restrictions following widespread and rare public protests.
Industrial production rose 2.2% in November from a year earlier, missing expectations of a 3.6% increase in a Reuters poll and slowing significantly from the 5.0% growth seen in October, according to the National Bureau of Statistics (NBS) data shown Thursday. It posted the slowest growth since May, partly due to disruptions at major manufacturing hubs in Guangzhou and Zhengzhou.
Retail sales fell 5.9% on general weakness in the services sector, also the biggest contraction since May. Analysts had expected the consumption indicator to shrink by 3.7%, accelerating from October’s 0.5% drop.
Notably, sales in the contact-intensive restaurant business fell 8.4% year-over-year, accelerating from October’s 8.1% decline.
Meanwhile, auto production plunged 9.9%, swinging from an 8.6% increase in October.
The Chinese yuan eased against the dollar on Thursday as data hit investor confidence.
“Weak activity data suggests that policy needs to be further eased to revive growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increase in the size of the MLF rollover this morning is in line with the general tone of the easing policy. Looking ahead, we also expect rates for the MLF to be lowered by 10bp in the next quarter.”
China’s central bank stepped up liquidity injections into the banking system on Thursday and maintained interest rates on medium-term loans, or MLFs, to keep liquidity conditions ample.
The world’s second-largest economy has been depressed by its zero-COVID policy, as tight controls on movement hampered consumption and production. Other headwinds facing the country are the collapse of the real estate sector, global recession risks and geopolitical uncertainties.
Real estate investment fell 19.9% year over year, the fastest pace since the statistics office began compiling the data in 2000, according to Reuters calculations based on NBS data.
Politicians have extended support to the sector on nearly every front, including credit lines from banks, bond financing and equity financing, but analysts said such effects have yet to be seen as home sales remained weak. .
Investments in fixed assets grew by 5.3% in the first 11 months of the year, compared to expectations for a 5.6% increase and 5.8% growth in the January-October period.
Hiring remained low among companies wary of their finances. The nationwide unemployment rate rose to 5.7% in November from 5.5% in October. Youth unemployment fell to 17.1% from 17.9% in October.
“December’s data could be even worse, not because everything is getting worse in China, because the end of the tunnel is coming,” said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis.
“I expect a sharp collapse in industrial production in December. This will be the immediate consequence of the opening,” he said, downgrading fourth-quarter GDP growth to 2.8% from 3% previously.
China has set out plans to expand domestic consumption and investment, state media said on Wednesday, as policymakers face multiple challenges following abrupt relaxations of harsh COVID-related restrictions, which are expected to usher in a surge in infections.
This would hit businesses and consumers, while a weakened global economy would hurt Chinese exports.
China’s economy grew by just 3% in the first three quarters of this year and is expected to stay around that rate for the full year, well below the official target of “around 5.5%”.
All eyes are on the closed-door annual Central Economic Work Conference, when Chinese leaders gather to set next year’s economic agenda. They will likely plot more stimulus measures, eager to prop up growth and ease disruptions caused by a sudden end to COVID-19 brakes, policy experts and analysts said.
($1 = 6.9593 Chinese Yuan)
Additional reporting by Liz Lee, Liangping Gao and Kevin Yao; Editing by Sam Holmes
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