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China has become the first major economy to return to growth since the Covid-19 pandemic began. But, a surprise drop in retail sales in June suggests there is more economic turbulence ahead.
Chines GDP grew by 3.2% in April-June, on an annual basis, the latest government figures show. That follows the 6.8% contraction in January-March as its economy shut down.
It’s still much weaker than the 6%+ growth which China was averaging before the pandemic, but Beijing policymakers will be relieved that their stimulus efforts appear to be feeding through to companies and consumers.
But despite this growth, China’s economy is still 1.6% smaller than at the end of 2019.
Liu Aihua, spokeswoman for the country’s National Statistics Bureau, told reporters tht China is enjoying “a momentum of restorative growth and gradual recovery”.
“We are confident on the economic recovery in the second half of this year,”
But Liu also warned there are “mounting external risks and challenges”, as Covid-19 cases continue to rise at a record pace.
Industrial output jumped by 4.8% in June, as factories stepped up production. Investment in property development recovered too. China’s service production index increased 2.3%.
But retail sales have taken an unexpected dive, sliding by 1.8% year-on-year in June. That suggests Chinese consumer are still cautious, which could signal a weak rebound in the months ahead.
Reaction to follow…
Also coming up today
Britain’s unemployment crisis has deepened this morning, with the Office for National Statistics reporting that 649,000 people have dropped off payrolls since March.
With millions of people on furlough, or working fewer hours, pay packets are suffering too.
The ONS reports that average total pay (including bonuses) among employees fell by 0.3% in the March to May quarter, for the first time since April to June 2014. Regular pay growth (excluding bonuses) slowed to 0.7%.
And if you account for inflation, basic pay is falling as well – meaning significant pain for households:
Our UK Coronavirus blog has more details:
It’s a busy day generally, with the European Central Bank’s governing council setting monetary policy today, and new US retail sales and unemployment data.
- 10am BST: Eurozone trade balance for May
- 12.15pm BST: Bank of England governor Andrew Bailey speaks on “Everyday economics: the importance of financial education post-Covid
- 12.45pm BST: European Central Bank interest rate decision
- 1.30pm BST: European Central Bank press conference
- 1.30pm BST: US weekly jobless figures
- 1.30pm BST: US retail sales for June