Sales of Property and Cars Slowed in China With August Lockdowns

(Bloomberg) — Chinese consumers cut back on buying cars and apartments in August as stronger regulation of the property market and a broad Covid outbreak in the country further undercut the economy’s already slowing recovery.

Property sales in the four first-tier cities declined 16% in August from a year ago, according to Bloomberg calculations based on weekly data. Total automobile sales including to companies likely dropped about 22% over the same period, the biggest decline since last March when the nation was still in lockdown to control the initial Covid cases. 

China’s economic growth was already slowing in July, with private consumption weakening faster than industrial and export sectors. That was made worse by the Covid outbreak in August as cities nationwide reintroduced lockdowns during the summer holidays, a time when consumers usually travel and spending on cars traditionally starts to pick up.  

Read more: China’s Economy Takes Hit from Delta Virus as Services Contract

Cars make up about 10% of the value of retail sales each month, but the continued shortage of computer chips and weakening demand has hit vehicle output and sales this year. The slump likely undermined retail sales growth for August, which the government is due to release next week. 

“A rapid slowdown in property sector activities could lead to a significant spillover effect on both upstream industrial demand and consumption,” Bank of America economists wrote in a report this week. They estimate that more than 28% of China’s gross domestic product is related to the property sector, and said more policy stimulus in the housing sector is needed to support growth. 

Some economic activities likely slowed further in August on a year-on-year basis, especially consumption and service activities, partly due to the flood shocks and Covid restrictions, UBS AG economists wrote in a note last week. “We see property activities weakening further in the second half on continued hawkish property policies,” they said.

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