BEIJING, Dec 15 (Reuters) – China’s economy shrank sharply in November as factory output fell and retail sales fell, either missing forecasts or sales reading the worst in a year. six months, due to the increase in cases of COVID-19 and the spread of the virus.
The data suggested a further deterioration in the economy as lockdowns in many cities, a slump in the property sector and a slowdown in global demand pointed to a bumpy path even as it left Beijing even imposed some of the strictest anti-virus restrictions in the world after the widespread and rare protests.
Industrial output rose 2.2% in November from a year earlier, missing expectations for a 3.6% gain in a Reuters poll and falling sharply from the 5.0% increase seen in In October, the National Bureau of Statistics (NBS) data showed on Thursday. It marked the slowest growth since May, due to disruptions in major manufacturing hubs Guangzhou and Zhengzhou.
Retail sales fell 5.9% amid broad weakness in the services sector, the biggest decline since May. Analysts had expected consumer spending to fall 3.7%, up from a 0.5% decline in October.
In particular, sales in the food service sector fell 8.4% from a year earlier, up from an 8.1% decline in October.
Meanwhile, auto production fell 9.9%, up from 8.6% in October.
China’s yuan weakened against the dollar on Thursday, as data hit investor confidence.
“Weak activity data suggests that policy needs to be eased further to revive growth,” said Hao Zhou, chief economist at GTJAI. “The increase in the volume of MLF rounds this morning is in line with the overall easing policy tone. Going forward, we also predict that the MLF rate will decrease by 10bps following Q1.”
China’s central bank injected cash into the banking system on Thursday and kept interest rates on its policy lending medium, or MLF, to maintain liquidity conditions.
The world’s second largest economy is depressed due to its zero-COVID policy, as the austerity measures curb consumption and production. Other problems facing the country are the decline of its resources, the risk of land subsidence and geopolitical uncertainty.
Property investment fell 19.9% year-on-year, the fastest since the statistics office began collecting data in 2000, according to Reuters calculations based on data from the NBS.
Politicians pushed to support the sector in almost every way, including bank loans, equity financing and equity financing, but analysts said that such results are yet to be seen as real estate sales remain weak.
Fixed investment grew 5.3% in the first 11 months of the year, against expectations for a 5.6% increase and a 5.8% increase in January-October.
Hiring remained low among companies concerned about their finances. The national unemployment rate rose to 5.7% in November from 5.5% in October. Youth unemployment fell to 17.1% from 17.9% in October.
“The December data could be worse – not because things are getting worse in China, because the end of the tunnel is coming,” said Alicia Garcia-Herrero, Asia’s chief economist. Pacific in Natixis.
“I expect a big fall in industrial production in December. This is the immediate result of the opening,” he said, which lowered GDP in the fourth quarter to 2.8% from 3 % previously.
China has laid out plans to expand domestic consumption and investment, state media said on Wednesday, as policymakers face a number of challenges after the sudden relaxation of strict restrictions on of COVID, which is expected to introduce infection.
It could hit businesses and consumers, while the global economy hurts Chinese exports.
China’s economy grew by just 3% in the first three quarters of this year and is expected to remain at that rate for the whole year, below the official target of “around 5.5%”.
All eyes turn to the closed annual Central Economic Forum, when Chinese leaders gather to set the economic agenda for the coming year. They are likely to map out further stimulus measures, eager to support growth and ease the disruption caused by the sudden end of the COVID-19 shutdown, policy analysts 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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