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China's domestic spending slows as economy recovers from COVID-19 outbreak

China's domestic spending slows as economy recovers from COVID-19 outbreak

FILE PHOTO: People wearing face masks walk in front of an Apple store at a shopping mall in Beijing, China Feb 18, 2020. (REUTERS/Carlos Garcia Rawlins/File Photo)

BEIJING: China's retail sales dropped in July, official data showed on Friday (Aug 14), indicating that sluggish consumer spending could hold up the country's recovery from the coronavirus outbreak.

Retail sales - a key indication of consumer sentiment - shrunk by 1.1 per cent 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 per cent on-year for retail sales in June.

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

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

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.

READ: Commentary: What China’s economy needs most is a good old big investment drive

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

READ: Chinese airlines offer unlimited flights to revive industry

Spokesman for the National Bureau of Statistics Fu Linghui said the data showed "a trend of steady recovery".

Industrial production grew by 4.8 per cent in July - the same level as the previous month, but below predictions from Bloomberg analysts of 5.2 per cent 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.

READ: In China, fears of financial Iron Curtain as US tensions rise

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 per cent in April to June, smashing expectations and a massive improvement on the 6.8 per cent contraction in the first quarter.

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Source: AFP/kv


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