China’s economy likely slowed further in August, with data on consumption, industrial output and investment due Wednesday to reveal the extent of the damage caused by an outbreak of the delta variant.
The extent of the slowdown will be closely watched for sign that it’s serious enough to prompt authorities to change their current stance of slowly withdrawing liquidity from markets and keeping stimulus limited. The ongoing regulatory crackdown on sectors like education, the internet and property may have exacerbated the recent economic weakness.
The Wednesday data will likely show China’s recovery remains uneven. Strong global demand led to record exports in August but domestic consumers turned cautious as lockdowns and fear kept many at home, meaning the industrial sector is expected to have fared better than retail sales.
To better gauge China’s economic performance, here’s a guide to what to watch for in the data:
Consumption took the hardest hit in August as the Covid-19 delta variant spread across China, forcing the closure of tourist spots and some cities during the summer holidays. However even before those outbreaks, China’s consumption rebound was not solid.
Indicators of the services industry painted a bleak picture for August, with both official and private gauges pointing to the first contraction since early 2020.
Although China now has the outbreak under control and has relaxed most restrictions, the impact on consumer spending will likely linger and the incomes of service providers will take a long time to recover.