China: COVID pandemic continues to weigh on growth outlook

Economic growth slowed in August, as consumption was hit by the lingering impact of earlier COVID-19 outbreaks, and investment remained weak, according to Oxford Economics. Meanwhile, a new outbreak that started a few days ago in Fujian is posing a downside risk to our forecast for a pick-up in growth in fourth quarter after a weak third quarter.

Industrial value-added growth slowed to 5.3 percent year-over-year in August from 6.4 percent year-over-year in July, as domestic demand weakened further amid lingering impact of the July–August COVID-19 outbreak. Growth in real retail sales slowed to 0.9 percent year-over-year in August, down from 6.4 percent year-over-year in July. This implies a 0.2 percent decline from the same month in 2019, compared with a 3.5 percent increase in July. The drag mainly came from service consumption, as reflected by an 11.2 percent fall in restaurant receipts from August 2019’s level versus plus 1.7 percent in July. Nominal fixed-asset invest