China's retail sales dropped in July, official data showed Friday, indicating that sluggish consumer spending could hold up the country's recovery from the coronavirus outbreak.

Retail sales -- a key indication of consumer sentiment -- shrank by 1.1 percent on-year, falling short of forecasts and suggesting many are still reticent about going out to spend time and money, even as China appears to have the virus largely under control.

The latest data follows a drop of 1.8 percent on-year for retail sales in June.

Bloomberg analysts had projected sales would recover to a modest 0.1 percent growth.

While the sale of goods just crept into positive territory, growing 0.2 percent, the catering industry was particularly badly hit, with sales down 11 percent.

The retail sector has an increasingly important role in China's economy as leaders look to consumers, rather than trade and investment, to drive growth.

A domestic consumption pickup is crucial as external demand weakens, with other countries battling the pandemic.

Fu Linghui, spokesman for the National Bureau of Statistics (NBS), said the data showed "a trend of steady recovery".

Industrial production grew by 4.8 percent in July -- the same as the previous month, but below predictions from Bloomberg analysts of 5.2 percent growth.

Meanwhile fixed asset investment for the year so far was down 1.6 percent year-on-year; an improvement on last month's data, but still weak.

"Not the best of economic numbers out of China today with both retail sales and industrial production underwhelming," said Stephen Innes, chief global markets strategist at AxiCorp.

"The glaring concerns around retail demand continue to speak volumes that it's going to take more than stimulus and deep discounts on luxury products to get people shopping again."

China is working to bounce back from a historic economic contraction in the first quarter caused by the virus, which had shut down most activity and forced people across the country to stay home.

The coronavirus -- which first emerged in the city of Wuhan late last year -- has since shut businesses and destroyed millions of jobs globally.

Unemployment in July was stable at 5.7 percent, the NBS said, level with the previous month. Analysts have warned the real level of unemployment is likely higher.

As several of the world's major economies plunge into recession, China's data suggests it is generally recovering quicker, as the first to be hit by COVID-19 and one of the first to recover.

China's GDP expanded 3.2 percent in April-June, smashing expectations and a massive improvement on the 6.8 percent contraction in the first quarter.

Asian markets struggle as US stimulus impasse drags on
Hong Kong (AFP) Aug 14, 2020 - Asian markets drifted Friday as investors grew increasingly concerned about the stalemate in Washington on a new stimulus for the world's top economy.

Hopes that Democrats and Republicans would cast aside their mutual animosity to stump up much-needed cash for struggling Americans have been key to supporting equities for weeks.

But they were dealt a blow Thursday when senators broke up for a summer recess, saying they would not return until early next month, while both sides continued to trade accusations over who was to blame for the impasse.

Democrats have called on Republicans and the White House to double their $1 trillion offer, having reduced their own proposal to $2 trillion from an initial $3.5 trillion.

But Senator Leader Mitch McConnell accused his opponents of pushing for several socialist measures to be introduced into the new bill, describing their tactics as "throwing spaghetti at the wall to see what sticks".

Still, the expectation remains that an agreement will at some point be found, particularly with an election just over two months away and millions of Americans in financial crisis.

"Congress' political grandstanding delay is posing some risk for the global recovery," said Stephen Innes at AxiCorp. "Still, there is no chance of this deal not going through for all the politically tarnishing Frugal Freddy reasons that have been alluded to.

"It is a matter of whether it is $1.5 trillion or $2 trillion, where bigger would be better."

In early trade, Hong Kong dipped 0.1 percent and Shanghai was flat, while Tokyo ended the morning with small gains and Sydney added 0.5 percent.

Taipei was marginally higher but Seoul dropped more than one percent, while there were also losses in Singapore, Manila and Wellington.

- China consumers reluctant -

Traders were given a weak lead from Wall Street, where the stimulus struggle trumped better-than-expected data showing fewer than a million people claimed jobless benefits last week for the first time since the pandemic struck in March.

"After stalling over several weeks, US jobless (figures) have begun to decline again, suggesting the US labour market is starting to improve, notwithstanding the economic impact from the containment measures introduced to combat the COVID-19 outbreak," said Rodrigo Catril at National Australia Bank.

But he warned: "Ironically, an improving labour market may ease the pressure on US politicians to come up with a new stimulus plan."

In a sign of the battle governments could have in rebooting their economies, data out of China showed consumers are still reluctant to go out spending with retail sales falling last month, confounding forecasts of a small increase.

While the drop was shallower than in June, Innes added that it speaks "volumes that it's going to take more than stimulus and deep discounts on luxury products to get people shopping again".

At the same time, industrial production continued to grow, suggesting the economy's recovery is being supported by the manufacturing sector.

Investors will be keeping a close eye on talks at the weekend between China and the US that will review the trade pact signed in January, though expectations are for the deal to be kept in place, despite increasing tensions between the two sides.

- Key figures around 0300 GMT -

Tokyo: Nikkei 225: UP 0.1 percent at 23,275.27 (break)

Hong Kong: Hang Seng: DOWN 0.1 percent at 25,205.75

Shanghai: Composite: FLAT at 3,319.26

Euro/dollar: DOWN at $1.1811 from $1.1820 at 2050 GMT

Dollar/yen: UP at 106.94 yen from 106.91 yen

Pound/dollar: DOWN at $1.3057 from $1.3066

Euro/pound: UP at 90.46 pence from 90.41 pence

West Texas Intermediate: UP 0.2 percent at $42.33 per barrel

Brent North Sea crude: UP 0.2 percent at $45.06 per barrel

New York - Dow: DOWN 0.3 percent at 27,896.72 (close)

London - FTSE 100: DOWN 1.5 percent at 6,185.62 (close)

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Asia markets hit by China-US tensions, stimulus wrangling
Hong Kong (AFP) Aug 7, 2020
A new China-US flare-up sent markets tumbling Friday, while the mood was also soured by US lawmakers' struggles to agree on a new economic stimulus - all against a backdrop of surging virus infections. China-US tensions were back on traders' minds after President Donald Trump signed an executive order barring US residents from doing any business with the Chinese parent companies of social media platforms TikTok and WeChat, citing national security concerns. The move, which comes into force in 4 ... read more