China's Consumer Spending, Factory Output Up But Annual Growth May Dive

Chinese consumer spending and factory output rose in August but still were weak, data showed Friday, and forecasters warned the second-largest economy is vulnerable to shutdowns of cities to fight COVID.

Photo Insert: Retail sales, one of China’s most important economic engines, rose 5.4% in August over a year earlier.

Housing sales sank while prices edged lower as government seeks to control surging corporate debt that set off an economic slump in mid-2021, Joe McDonald reported for the Associated Press (AP).

"China’s economy held up slightly better than anticipated last month, but momentum still weakened,” said Julian Evans-Pritchard of Capital Economics in a report. “September is shaping up to be even worse.”

Chinese leaders are trying to prop up economic growth that sank to 2.5% over a year earlier in the first six months of 2022, less than half the official 5.5% target, without big stimulus spending that might push up debt and housing costs.

Economists say this year’s Chinese growth might come in below 3%, less than half of last year’s 8.1%. The Communist Party has stopped talking about being able to meet its 5.5% target.

Retail sales, one of China’s most important economic engines, rose 5.4% in August over a year earlier, double the previous month’s 2.7% growth, according to the National Bureau of Statistics.

That beat forecasts of 3.3%. Factory output grew by 4.2%, up from July’s 3.8% but still weak by Chinese standards. Investment in factories, real estate, and other fixed assets edged up to 5.8% from the previous month’s 5.7%.

China’s rebound from the pandemic was disrupted by anti-virus measures that shut down Shanghai and other industrial centers starting in March. Those restrictions have eased but controls have been temporarily reimposed on the southern business center of Shenzhen and other cities to control outbreaks.

The economy “remains at risk from future lockdowns,” said Robert Carnell of ING in a report.

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