China's economy loses momentum as COVID restrictions hit factories and consumers

China’s economy loses momentum as COVID restrictions hit factories and consumers

By Ellen Zhang and Kevin Yao

BEIJING (Reuters) – China’s economy suffered a broad-based slowdown in October as factory output grew slower than expected and retail sales fell for the first time in five months, underscoring weak demand in China and abroad.

The world’s second-largest economy faces a series of headwinds, including prolonged COVID-19 restrictions, global recession risks and a housing downturn. In a sign of continued weakness in the sector, Tuesday’s data also showed that real estate investment fell at its fastest pace since the start of 2020 in October.

The downbeat data poses a challenge to Chinese policymakers as they steer the $17 trillion economy through choppy waters, following recent moves to ease some COVID restrictions and provide financial support to the struggling real estate sector. .

“October activity growth largely slowed and exceeded market expectations, indicating a weak start to the fourth quarter as a worsening of the COVID situation, a prolonged housing slowdown and slower property growth exports more than offset continued political stimulus,” Goldman Sachs analysts said in a note.

Industrial production rose 5.0% in October from a year earlier, missing expectations of a 5.2% gain in a Reuters poll and slowing from the 6.3% growth seen in September, data from the National Bureau of Statistics (NBS) showed on Tuesday.

Retail sales, an indicator of consumption, fell for the first time since May when Shanghai was under citywide lockdown. Sales fell 0.5%, against expectations of a 1.0% rise and compared to a 2.5% gain in September.

A week-long holiday did little to boost consumption in October, traditionally a popular month for domestic travel.

COVID outbreaks spread across the country in October, disrupting the pandemic-sensitive service sector, including the restaurant industry. Restaurant revenue in China fell 8.1%, down sharply from a 1.7% drop in September, according to BES data.

National COVID containment measures are putting “huge” pressure on the economy, NBS spokesperson Fu Linghui said, adding downside risks to the global economy are increasing.

“The impact of the triple pressure on economic operations – falling demand, supply shocks and weakening expectations – is growing,” Fu said at a press conference in Beijing.

The economic outlook remains bleak despite Beijing’s decision to ease some COVID-related restrictions, said Zichun Huang, an economist at Capital Economics.

“With exports cooling, the real estate sector still in the doldrums and the zero-COVID policy likely to stay in place longer than many hope, the short-term outlook is bleak.”

Despite the downbeat numbers, Chinese stocks rose on Tuesday on signs of easing China-US tensions after a meeting between US President Joe Biden and Chinese leader Xi Jinping, while Beijing’s latest support measures also rallied. the feeling.


Property investment fell 16.0% year-on-year in October – its biggest drop since January-February 2020, according to Reuters calculations based on BNS data. It fell 12.1% in September.

Property sales measured by floor area fell 23.2% year on year in October, down for a 15th consecutive month, as buyers are reluctant to take on more debt as the economy slows amid restrictions prolonged COVIDs.

China’s real estate sector has slowed sharply as the government has sought to limit excessive borrowing. A plan to boost liquidity presented by Chinese regulators on Sunday sent Chinese real estate stocks and bonds soaring on Monday.

China’s financial regulator said in a notice on Monday that it will allow property developers to access some housing funds on presale, in the latest move to ease the liquidity crunch.

“It is clear that new policies aimed at boosting domestic demand are needed to refuel China’s fragile recovery. macro growth,” said Bruce Pang, chief economist at Jones. Lang Lasalle.

Investment in fixed assets rose 5.8% in the first 10 months of the year, against expectations of a 5.9% rise and 5.9% growth in January-September .

Hiring remained weak among companies increasingly wary of their finances.

The national survey-based unemployment rate remained at 5.5% in October, unchanged from September. The survey-based unemployment rate in 31 major cities rose to 6.0% from 5.8% in September.

The country is on course to miss its annual growth target of around 5.5%, analysts said. Economists in a Reuters poll expect the economy to grow 3.2% in 2022.

(Reporting by Ellen Zhang and Kevin Yao; Additional reporting by Liangping Gao, Ryan Woo and Liz Lee; Editing by Ana Nicolaci da Costa)

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