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China’s retail sales gained 8.5 percent in July from a year earlier, disappointing analysts polled by Reuters who had forecast a median rise of 11.5 percent, CNBC reported.
“The impact of multiple factors including the growing external uncertainties and the domestic COVID-19 epidemic and flooding situation” around China weakened consumer spending, the National Bureau of Statistics said in a statement, adding that the nation’s “economic recovery is still unstable and uneven.”
Passenger vehicle sales were the only spending category that shrank, dropping 1.8 percent year over year.
Urban unemployment stood at 5.1 percent; 16.2 percent of people ages 16 to 24 remained jobless.
Factory output added 6.4 percent in July compared to a year earlier, also short of Reuters analysts’ forecast of 7.8 percent.
Fixed asset investment for the first seven months of the year also lagged expectations, rising 10.3 percent instead of the 11.3 percent predicted.
Economists are now scaling back their outlook for China’s economy this year, due in large part to China’s “zero-tolerance policy” regarding COVID infections, setting off a new round of lockdowns and travel restrictions.
Earlier this month, the government shut one terminal at the world’s third-busiest port when a single worker tested positive for the virus. (See related story.)
Goldman Sachs now predicts an 8.3-percent expansion of China’s GDP this year, no longer the 8.6 percent it had expected; Nomura sees 8.2 percent instead of its earlier forecast of 8.9 percent.
TREND FORECAST: Although China’s economy is slowing, the slowdown is in proportion to that which is underway across the rest of the world.
Most importantly, as goes China, so goes much of the world. If its export market dramatically slows it is a blaring signal that the entire world economy is slowing down since more countries will be buying less.
And as go exports, so too go imports. If the Chinese consumers slow down purchases of imported products, it will also push the GDPs down among nations and the profit margins of businesses that depend on exporting to China.
However, we maintain our forecast that China’s economy will replace the U.S.’s as the world’s dominant economy. In the past, we have predicted that the U.S economy will be dethroned before 2030; the ongoing COVID infections may push that date back a few years.