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China's recovery sputters as factory and retail data disappoints

Lizzy Burden
A Chinese retail district
A Chinese retail district

Falling retail sales in China and a weaker than expected rise in factory output have sparked fresh concerns that the country is struggling to recover after Covid hit.

Shoppers spent 1.1pc less last month than a year earlier in a sign that domestic demand is still subdued.

Meanwhile overall exports were up 7.2pc last month compared to a year earlier, but there was only a 4.8pc rise in industrial production according to official data – the same growth rate as the previous month.

Although the unexpectedly poor performance is partly due to flooding in the south of the country, it will raise fears that China's rebound is running out of steam after it was the first country to suffer from coronavirus.

Economists are watching closely for signs of how the West is likely to fare as it seeks to return to normality and lure nervous consumers back into their old free-spending habits.

The National Bureau of Statistics said China created 6.7m jobs, nearly 2m fewer than would normally be expected. 

An official in the Communist country said the trends showed a steady recovery.

Economic Intelligence newsletter SUBSCRIBER (index)
Economic Intelligence newsletter SUBSCRIBER (index)

Tommy Wu, of Oxford Economics, expects business investment to drive a further bounceback in the second half of the year.

He said: “While household consumption has been the laggard, we expect it to gather pace along with a gradual improvement in the labour market.

“But the road ahead appears bumpy, as new export orders remain weak and the recovery path will be uneven across economies.”

Chinese and US officials are expected to hold online talks on Saturday about the progress of their Phase One trade deal signed in January.

Relations between the world's two largest economies have soured over the origins of the virus - believed to be at a wildlife market in the city of Wuhan - China's brutal crackdown on Hong Kong, and the Trump administration's order to ban the Chinese internet giants TikTok and WeChat from operating in the US.