China’s economic recovery tested as Covid outbreak persists

Manufacturing investment also likely got a boost from strong export demand, along with improving profitability due to a moderation in price pressures.

NEW YORK: China will likely report a further recovery in its economy in July although the strength and longevity of that rebound is far from certain as Covid outbreaks continue to spread and a property slump shows no sign of easing.

Official data soon will probably show a raft of key indicators – including industrial output and retail sales – improved last month as business and consumer activity gradually picked up from the worst of the Covid lockdowns in the second quarter.

The economic picture might be mixed, though, as property investment probably slowed, and the unemployment rate likely remained elevated.

Independent high-frequency data have also painted a more negative picture of the economy’s outlook.

Here, truck flows – a proxy for economic output – was significantly lower in July than at the same time last year with home sales last month plunging from a year earlier.

With policy makers signalling a “wait-andsee” attitude toward more stimulus and inflation creeping up, the data for July will offer important clues on the policy direction for the rest of the year.

Retail sales probably grew 5% in July from a year ago, according to the median estimate ina Bloomberg survey of economists.

This was up from 3.1% in June as Covid controls were relaxed.

Automobile sales were also boosted last month because of favourable policies, such as subsidies and tax cuts, rolled out this year to entice buyers.

Spending on transportation and hotels may have picked up because of seasonal demand for summer vacations.

Growth in fixed asset investment likely held up in July as policy makers pushed for an acceleration in the construction of major infrastructure projects.

Economists forecast an increase of 6.3% in the seven months through July.

This was little changed to 6.1% in the first half of the year.

Manufacturing investment also likely got a boost from strong export demand, along with improving profitability due to a moderation in price pressures.

Property investment, however, likely slowed further in July. This was amid a widening mortgage boycott crisis and weakening buyer confidence.

The recovery momentum in the industrial sector likely stayed intact.

Industrial output is estimated to have grown 4.4% in July, survey results showed, up from 3.9% in the previous month.

However, weaker-than-expected official and private purchasing managers indexes pointed to softer manufacturing activity.

While Covid disruptions to supply chains have eased in general, regional flareups are still causing hiccups.

Jobs figures are gaining increasing attention as top leaders downplay the country’s gross domestic product growth target of “around 5.5%”.

This was in favour of attaching greater significance to stability in employment and prices.

China’s unemployment rate likely remained heightened in July, with economists expecting the surveyed jobless rate to stay unchanged at 5.5%.

That’s the ceiling Beijing set for the full year.