China's factory, retail sectors skid as Covid-19 hits growth

BEIJING - China’s economy lost more steam in November as factory output growth slowed and retail sales extended declines, both missing forecasts and clocking their worst readings since May, hobbled by surging Covid-19 infections and widespread virus curbs.

The data suggested a further deterioration in economic conditions as lockdowns in many cities, a persistent property-sector crunch and weakening global demand pointed to a bumpy road ahead even as Beijing looked to ditch some of the world’s toughest anti-virus restrictions.

Industrial output rose 2.2 per cent in November from a year earlier, missing expectations for a 3.6 per cent gain in a Reuters poll and slowing significantly from the 5 per cent growth seen in October, the National Bureau of Statistics data showed on Thursday.

It marked the slowest growth since May when Shanghai was under lockdown, partly due to disruptions in key manufacturing hubs Guangzhou and Zhengzhou.

Retail sales fell 5.9 per cent amid broad-based weakness in the services sector, also the biggest contraction since May.

Analysts had expected the gauge of consumption to shrink 3.7 per cent, accelerating from a 0.5 per cent dip in October.

“The weak activity data suggest that the policy needs to be eased further to revive the growth momentum,” said Mr Hao Zhou, chief economist at Guotai Junan International.

“The increased size of the MLF (medium-term policy loans) rollover this morning is in line with the overall easing policy tones. Looking ahead, we also forecast that the rates for MLF will be lowered by 10 basis points (in the) next (first quarter).”

China’s central bank ramped up cash injections into the banking system on Thursday and held interest rates on MLF to keep liquidity conditions ample.

China’s economy has been depressed by its zero-Covid policy,

as tight movement controls hampered consumption and production. Other headwinds the country faces are its property slump, global recession risks and geopolitical uncertainties.

Property investment fell 9.8 per cent year on year in January-November, after declining 8.8 per cent in January-October, dragging on the sector’s downturn.

Policymakers have rolled out support for the sector on almost all fronts, including credit lines from banks, bond financing and equity financing, but analysts said such effects are yet to be seen as home sales still remained weak.

Fixed asset investment expanded 5.3 per cent in the first 11 months of the year, versus expectations for a 5.6 per cent rise and growth of 5.8 per cent in January-October.

Hiring remained low among companies wary about their finances. The nationwide jobless rate was at 5.7 per cent in November, up from 5.5 per cent in October. Youth unemployment stood at 17.1 per cent, lower than the 17.9 per cent in October.

The economy grew just 3 per cent in the first three quarters of this year

and is expected to stay around that rate for the full year, well below the official target of “around 5.5 per cent”.

All eyes are on the closed-door annual Central Economic Work Conference, where Chinese leaders are gathered to set next year’s economic agenda.

They will likely map out more stimulus steps, eager to underpin growth and ease disruptions caused by a sudden end to Covid-19 curbs, policy insiders and analysts said. REUTERS