China's Economy Sputters As Factory Output, Retail Sales Sag

China's factory output and retail sales growth slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations, adding to signs the economic recovery is losing momentum, Kevin Yao and Gabriel Crossley reported for Reuters.

Photo Insert: A worker assembles mouses at a production line at a factory in China.

Industrial production in the world's second-largest economy increased 6.4% year-on-year in July, data from the National Bureau of Statistics (NBS) showed on Monday.

Analysts had expected output to rise 7.8% after growing 8.3% in June. Retail sales increased 8.5% in July from a year ago, far lower than the forecast 11.5% rise and June's 12.1% uptick.

China's economy has rebounded to its pre-pandemic growth levels, but the expansion is losing steam as businesses grapple with higher costs and supply bottlenecks. New COVID-19 infections in July also led to fresh restrictions, disrupting the country's factory output already hit by severe weather this summer.

China's central bank injected billions of yuan through medium-term loans into the financial system on Monday, which many market participants interpreted as an effort to prop up the economy, although the cost of such borrowing was left unchanged.

Policy insiders told Reuters earlier in August that China is poised to quicken spending on infrastructure projects while the central bank supports the economy with modest easing steps.

Data earlier this month also showed export growth, which has been a key driver of China's impressive rebound from the COVID-19 slump in early 2020, unexpectedly slowed in July.

Consumption, industrial production and investment could all slow further in August, analysts from Nomura said in a note, due to COVID-19 controls and tightening measures in the property sector and high-polluting industries.

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Production controls sent crude steel output to the lowest monthly level since April 2020 in July.

Meanwhile, China tightened social restrictions to fight its latest COVID-19 outbreak in several cities, hitting the services sector, especially travel and hospitality in the country.

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