Has China's Domestic Demand Bottomed Out? August Retail Sales Increase by 0.5% (Comprehensive)

Domestic Demand as a Barometer of China's Economy, 2% Growth Expected This Year
Car Sales Drive Growth, 1.703 Million Units Sold in August, Highest Since May 2018

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Last month, China's retail sales increased by 0.5% compared to the previous year. This is the first time since December last year that China's monthly retail sales have shown a year-on-year increase.

There is also analysis that the domestic demand, a core pillar of the Chinese economy, has hit bottom, lending weight to optimistic forecasts that the Chinese economy will achieve a steady growth rate in the 2% range this year.

According to the National Bureau of Statistics of China on the 15th, retail sales in August amounted to 2.9273 trillion yuan (approximately 509 trillion KRW), a 0.5% increase compared to the same month last year.

In July, China's retail sales showed a 1.1% decrease year-on-year, indicating that it had not yet escaped the impact of the novel coronavirus infection (COVID-19).

China's retail sales are largely composed of goods consumption and dining consumption.

The shift to positive retail sales means that both goods and dining consumption either turned positive or their decline was significantly reduced. In July, goods consumption increased by 0.2%, while dining consumption decreased by 11.0%.

[Image source=Yonhap News]

Retail sales are estimated to have been driven by automobile sales.

The total number of cars sold in China in August was 1,703,000 units, an 8.9% increase compared to the previous year. This is the highest figure since May 2018.

By vehicle type, passenger cars and sport utility vehicles (SUVs) sold 823,000 and 782,000 units respectively. Environmentally friendly vehicles such as electric cars sold 100,000 units (82,500 electric cars, 17,500 hybrids, etc.).

The surge in Chinese automobile sales is attributed to the avoidance of public transportation due to COVID-19 and aggressive marketing by Chinese automakers.

With no new COVID-19 confirmed cases reported in mainland China, dining consumption is also estimated to have increased or its decline significantly reduced.

Industrial production in August also rose by 5.6% compared to the same period last year, marking the highest monthly industrial production growth rate since December last year (6.9%). The market had expected industrial production in August to be 5.1%, but it far exceeded this.

Cumulative industrial production up to August also increased by 0.4% compared to the same period last year, turning the annual overall industrial production growth rate positive.

As expectations for the Chinese economy grow, major global research institutions such as JP Morgan are raising their economic forecasts for China.

JP Morgan has projected that China's economy will grow by 2.4% this year. Furthermore, it forecasts an 8.2% growth next year (a figure adjusted for the base effect).

A Chinese diplomatic source said, "The domestic demand indicators can gauge China's economic growth this year," adding, "Optimistic evaluations and signals about the Chinese economy are emerging everywhere."

This content was produced with the assistance of AI translation services.