In July, China s economy slowed with factory and retail activity squeezed by Beijing's zero-Covid policy and a property crisis, while the central bank cut key lending rates to revive demand.
The July industrial output grew by 3.8% from a year earlier, slightly down from 3.9% in June, according to data from the National Bureau of Statistics NBS. That is compared to the 4.6% increase predicted by analysts in a Reuters poll.
Retail sales, which were only positive in June, went up 2.7% from a year ago, much less than analysts predicted for 5% growth and below the 3.1% growth seen in June.
The world's second-biggest economy escaped a contraction in the June quarter, which was hobbled by the lockdown of the Shanghai commercial hub, a deepening downturn in the property market and persistently soft consumer spending.
There were reports of the more transmissible Omicron variant found in several Chinese cities, including manufacturing hubs and popular tourist spots, which imposed lock down measures in July.
The foundation for domestic economic recovery is not yet solid and the risk of stagflation in the world economy is rising, the NBS warned in a statement.
The property sector, which has been further hampered by a mortgage boycott that weighed on buyers sentiment, deteriorated in July. In July, property investment fell 12.3%, the fastest rate this year, while new sales fell to 28.9%.
The economy is expected to miss its official growth target this year, set at 5.5% for the first time since 2015, as Chinese policymakers are trying to shoring up a fragile recovery and eradicating emerging Covid clusters.
Exports were the only thing that was a disappointment in July, with all of the economic data disappointed. Nie Wen, a Shanghai-based economist at Hwabao Trust, said that Covid outbreaks and the heatwaves in July weighed on activity, and that lending demand from the real economy remained weak, suggesting a cautious outlook for the months ahead.
It is becoming harder to achieve the 5 -- 5.5% growth in the second half. The employment situation was fragile. The jobless rate in the nationwide fell to 5.4% in July from 5.5% in June, although youth unemployment stayed high, reaching a new record 19.9% in July.
The central bank lowered interest rates on key lending facilities for the second time this year in order to prop up growth. Data showed on Friday that new yuan loans fell by more than expected in July as companies and consumers stayed wary of taking on debt.
Wang Jun, economist at the Zhongyuan Bank believes that authorities will focus on implementing existing policies rather than roll out aggressive new stimulus.
We are facing a typical liquidity trap problem. It's true that companies and consumers are cautious about taking on more debt, no matter how loose the credit supply is. Some of them are paying back their debt in advance. In the first seven months of the year, a projected 6.2% increase in fixed asset investment, which Beijing had hoped would drive growth in the second half as exports soften, grew 5.7% in the first seven months of the year from a year ago, compared to a 6.1% rise in January-June.