Retail sales data from the world’s two largest economies could set the tone on Wall Street on Friday. The first round, from China, suggest the coronavirus recovery could take longer than expected.
Retail sales in China declined 1.1% in July compared to the previous year, surprising analysts who had expected a return to growth after months of falling sales caused by the pandemic.
Months have passed since China eased its most restrictive lockdown measures, and continued retail weakness suggests that some shoppers have not yet returned to their pre-pandemic spending habits.
More bad news: While fixed asset investment contracted by less than expected, industrial output figures fell short of analyst estimates.
“The latest data suggest that China’s economy continued to recover in July, though less quickly than expected,” said Martin Rasmussen of Capital Economics.
“A slowdown in the recovery was always likely at some point as the initial boost from re-opening faded. And we still anticipate a further gradual improvement in activity in the coming months on the back of policy support,” he added.
US retail sales are up next.
Economists expect an increase of 1.9%, according to data provider Refinitiv. That would be a significant drop off from June, when shoppers flooded back to stores and boosted sales by 7.5%, compared to the previous month.
The surge in coronavirus cases in July has dashed hopes for another strong month. Instead, some analysts wonder whether retail sales turned negative last month.
“The recent spike in Covid-19 cases is hurting confidence,” analysts at ING wrote in a recent research note.
“It is also leading many state governors to reverse course on their re-opening plans as they worry about strains on their healthcare systems if rising infection rates are left unchecked. The result is that businesses that had re-opened are being forced to close again with workers losing their jobs,” they added.
