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China’s industrial engine gathers speed

Economic News, World

China’s industrial engine gathers speed





China’s industrial output accelerated the most in eight months in August, while retail sales grew for the first time this year, suggesting the economic recovery is gathering pace as demand starts to improve more broadly from the coronavirus crisis.



An annual decline in fixed-asset investment over January-August also moderated thanks to expanded stimulus from Beijing, but authorities remain wary about the outlook given heightened external risks, including from intensifying Sino-U.S. tensions.



After the pandemic paralysed the economy, China’s recovery has been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound. Floods across southwestern China that disrupted production in July have receded.



“Strong external demand, a further recovery from the pandemic and pent-up demand from the floods all contributed to the robust activity data in August,” Ting Lu, chief China economist at Nomura, said in a note to clients.



“We expect a further, albeit gradual, recovery of the services sector, a steady improvement in retail sales and elevated fixed-asset investment growth.”



Retail sales also beat analysts’ forecast with a 0.5% rise on-year, snapping a seven-month downturn and bettering expectations for zero growth. In July, sales dropped 1.1%, but consumer confidence has been picking up lately, from spending on automobiles and duty-free shopping.



Auto sales rose 11.8% in August year-on-year while sales of telecoms products jumped 25.1%, the data showed.



The decline in fixed-asset investment slowed, falling 0.3% in January-August from the year-ago period, compared with a forecast 0.4% slide and a larger 1.6% decline in the first seven months of the year.



Private sector fixed-asset investment, which accounts for 60% of total investment, fell a less steep 2.8% in January-August, compared with a 5.7% decline in the first seven months.



Property investment, a crucial growth driver, also jumped the most in 16 months in August.



In commodities, China posted record output in both crude steel and aluminium last month thanks to robust demand from the construction sector and recovery in automobile sales.









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