Retail sales fell 1.1%YoY in July, better than -1.8%YoY a month ago. The main reason for the continued negative yearly growth in retail sales was the -11.0%YoY spending on catering, which results from social distancing measures in China. We do not expect this situation to change particularly over the rest of 2020, or until there is an effective vaccine for Covid-19.

We also observe that high-end spending has returned. Chinese tourists could not travel abroad during the summer holidays because of travel restrictions from other economies. But cross-province travel is now allowed in China. This resulted in growth in spending on cosmetics and jewellery rising by 9.2%YoY and 7.5%YoY respectively.

Industrial production stabilised at 4.8%YoY growth in July from the previous month. Most of the growth came from automobiles, industrial robots, machinery and telecommunication production, at 21.6%YoY, 19.4%YoY, 15.6%YoY, and 11.8%YoY respectively. This production is partly for export, as seen from June‘s export recovery, and partly for domestic use as some exports and most domestic orders continue to recover from the trough of the production cycle in 1H20.