Coronavirus: Nanjing Delta outbreak threatens China’s summer spending, adding new pressure to slowing economy

China faces a further slide in consumer spending after authorities imposed lockdowns to control the Delta outbreak that began in Nanjing and has spread to several provinces

Some analysts fear the outbreak could also slow factory activity unless authorities can quickly quash its rapid spread around the country

3-MIN READ3-MIN

Residents register for vaccinations in Nanjing, the epicentre of China’s latest coronavirus outbreak. Photo: Xinhua

Published: 7:30am, 4 Aug 2021Updated: 8:56am, 4 Aug 2021

The new Delta variant outbreak that started in China’s Nanjing could heap further downward pressure on the nation’s slowing retail spending and may worsen factory activity, possibly exacerbating an anticipated economic slowdown in the latter part of the year, analysts said.

The world’s second-biggest economy, already on alert for an impending economic crunch, now faces a bigger slide in consumer spending due to slower tourism and travel caused by lockdowns to control the outbreak, which has spread to several provinces. Retail spending is traditionally higher in summer when people take holidays.

“August is the peak season for summer consumer activities, we expect this round of new cases will have a greater impact on service industry consumption,” said Citic Securities in a note.

Consumer spending has borne the brunt of the economic fallout from the pandemic.

The impact of recent case resurgence on the summer tourism market is grim

Xu Xiaolei

While China’s total retail sales of consumer goods in the first half of the year increased by 23 per cent compared to the year before, they were coming off a low base, and analysts say spending might have peaked.

Xu Xiaolei, a marketing manager at China’s CYTS Tours, told the Global Times on Saturday retail spending for leisure and travel would have recovered to near pre-pandemic levels had it not been for the rising infections now spreading to other parts of the country from Nanjing.

“The impact of recent case resurgence on the summer tourism market is grim, with popular scenic spots in central and eastern China expected to see more than 50 per cent plunge in tourism revenue,” Xu said.

Similar to the Delta outbreak in Guangzhou between May and June, the Nanjing cluster could snowball and cut into spending, hitting Nanjing’s economy first.