China’s central bank cut key lending rates on Monday to revive demand, with data showing the economy unexpectedly slowed in July, with Beijing’s zero-Covid policy and property crisis pushing factories and retailers down. activity is under pressure.

A series of grim figures show the world’s second-largest economy is struggling to shake off the blow to June quarter’s growth from tough Covid restrictions, prompting some economists to cut forecasts. increase.

The National Bureau of Statistics (NBS) said industrial output rose 3.8% in July from a year earlier, below the 3.9% growth in June and the 4.6% increase analysts had expected in a Reuters poll.

Retail sales, which just picked up growth in June, rose 2.7% year-on-year, below the forecast of 5% growth and the 3.1% growth seen in June.

“July data suggests the post-lockdown recovery has lost momentum,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“The People’s Bank of China has already responded to these headwinds by stepping up support…but credit growth is proving to be less responsive to policy easing than in the past. is probably not enough to prevent further economic weakening.”

The renminbi fell to a one-week low against the dollar, while Australian and New Zealand currencies rallied from recent two-month highs.

China’s economy narrowly escaped a contraction in the June quarter, dragged down by the shutdown of Shanghai’s commercial hub, a deepening downturn in the property market and persistently soft consumer spending.

Risks remain plentiful as many Chinese cities, including manufacturing hubs and popular tourist attractions, imposed lockdown measures in July after new outbreaks of the more contagious Omicron subspecies were discovered.

The property sector, further reeling as a mortgage boycott weighed on buyer sentiment, worsened in July. Property investment fell 12.3% in July, his fastest pace this year, but the decline in new sales deepened to 28.9%.

Hwabao Trust’s Shanghai-based economist Nie Wen cut his forecast for third-quarter GDP growth by one percentage point to 4-4.5% after weaker-than-expected data. In the second half of the year it is becoming increasingly difficult for him to even achieve 5-5.5% growth.”

To support growth, the central bank unexpectedly cut interest rates on a major credit facility on Monday for the second time this year.

Chinese policymakers are trying to strengthen a fragile recovery and balance the need to eradicate new Covid clusters. expected to fall short of its official growth targets.

NBS spokesman Fu Linghui said a sporadic Covid outbreak and heatwave in southern China had affected activity in July, against the backdrop of a slowing global economic recovery and high inflation. said to be the cause of

Yiwu city in eastern Zhejiang province, a major global supplier of small, cheap products, has been grappling with Covid-related disruptions intermittently since July. Since August 11th, many parts of the city have been under a lengthy lockdown.

“Since the city imposed a ‘quiet mode’, we have stopped production in our factories,” said a sales manager at a Yiwu factory that makes consumer goods.

Fixed asset investment, which Beijing hopes will make up for the slowdown in exports in the second half, increased 5.7% in the first seven months of the year from a year earlier. January to June.

The employment situation remained precarious. The national survey-based unemployment rate eased slightly from 5.5% in June to 5.4% in July, but youth unemployment remains high, hitting a record high of 19.9% ​​in July. reached.

Rate cuts and weak activity data come after official data on Friday showed new yuan loans tumbled more than expected in July as businesses and consumers remained wary of taking on debt. It was

But Wang Jun, director of the China Chief Economists Forum, believes there are limits to further stimulus, and even if the economy continues to be weak, the authorities will instead opt for existing policies. I think we will concentrate on the implementation of

“We are currently facing a classic liquidity trap problem: businesses and consumers are wary of taking on more debt no matter how loose the credit supply,” Wang said. “Some people are paying their debts in advance. This could be a harbinger of a recession.”

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