China Industrial Output Growth Softens; Retail Sales Fall Unexpectedly

China’s industrial production grew at a slower pace in October and retail sales registered an unexpected decline due to intensified virus disruptions, official data revealed on Tuesday.

Industrial production posted an annual growth of 5.0 percent in October following prior month’s 6.3 percent rise, the National Bureau of Statistics reported. This was also weaker than the 5.2 percent rise expected by economists.

Due to the disruptions caused by the rising cases of COVID-19, retail sales dropped 0.5 percent annually, reversing the 2.5 percent increase seen in September. The decline was in contrast to the 1.0 percent expected gain.

During January to October, fixed asset investment grew 5.8 percent after rising 5.9 percent in the January to September period. Economists had forecast investment to grow again by 5.9 percent.

The urban unemployment rate remained unchanged at 5.5 percent in October.

“With exports cooling, the property sector still in the doldrums and the zero-COVID policy likely to remain in place longer than many hope, the near-term outlook is gloomy,” Capital Economics Economist Zichun Huang, said.

With confidence in the housing market and wider economy still low, more policy action is needed to revive subdued credit growth, the economist added.

Amid property market downturn and weaker economic activity, bank lending had declined sharply to CNY 615.2 billion in October from CNY 2.47 trillion in September, official data showed last week.

The People’s Bank of China on Tuesday injected CNY 850 billion via one-year medium-term lending facility. The interest rate on the one-year MLF was retained at 2.75 percent. The bank also conducted seven-day reverse repo operations at an interest rate of 2.0 percent.

In the third quarter, the economy had expanded at a faster pace of 3.9 percent after the relaxation of Covid restrictions. However, the growth rate was short of Beijing’s target of ‘around 5.5 percent’ for the whole year.

The International Monetary Fund had projected China’s economy to grow 3.2 percent this year, but slashed the country’s forecast for next year to 4.4 percent.

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