Hello and welcome to our continued coverage of the global economy, financial markets, the eurozone and business.
China has become the first major economy to return to growth since the start of the Covid-19 pandemic. But, a surprise drop in retail sales in June suggests that there is more economic turmoil ahead.
China’s GDP increased 3.2% in April-June, on an annual basis, according to the latest government figures. This follows the 6.8% contraction in January-March as its economy closed.
This is still much weaker than the 6% + growth that China had on average before the pandemic, but policymakers in Beijing will be relieved that their recovery efforts seem to be having an impact on businesses and consumers.
But despite this growth, the Chinese economy is still 1.6% smaller than at the end of 2019.
Liu Aihua, spokesperson for the country’s National Bureau of Statistics, told reporters that China is experiencing “momentum of restorative growth and gradual recovery”.
“We are confident about the economic recovery in the second half of this year”,
But Liu also warned that there were “growing external risks and challenges,” as Covid-19 cases continue to rise at a record pace.
Industrial production jumped 4.8% in June, as factories increased their production. Investment in real estate development also picked up. The service production index in China rose 2.3%.
But retail sales unexpectedly plunged, slipping 1.8% year over year in June. This suggests that Chinese consumers are still cautious, which could signal a slight rebound in the coming months.
Reaction to follow…
Also coming today
The unemployment crisis in Britain got worse this morning, with the Office for National Statistics reporting that 649,000 people have abandoned their payroll since March.
With millions of people on vacation or working fewer hours, pay packages are also suffering.
The ONS reports that average total compensation (including bonuses) among employees decreased by 0.3% between March and May, for the first time from April to June 2014. Regular wage growth (excluding bonuses) slowed to 0.7%.
And if you factor in inflation, base wages also go down – which means significant pain for households:
Our UK Coronavirus blog contains more details:
The day is usually busy, with the European Central Bank’s board of governors today setting monetary policy and new data on retail sales and unemployment in the United States.
- 10 a.m. BST: Eurozone trade balance for May
- 12:15 pm BST: Andrew Bailey, Governor of the Bank of England, speaks on “Everyday Economy: The Importance of Financial Education After Covid
- 12:45 BST: European Central Bank decision on interest rates
- 1.30 p.m. BST: press conference of the European Central Bank
- 1:30 p.m. BST: weekly American unemployment figures
- 1:30 p.m. BST: US retail sales for June