China’s consumption weakened during its Golden Week holiday that finished Thursday, prompting Nomura Holdings to say its economy is heading for a double-dip downturn.
During the week-long holiday, domestic visits plunged almost 30% to 515 million trips and tourism revenues dropped 40% to a little more than 389 billion yuan ($60.3 billion), from pre-pandemic levels, China’s Ministry of Culture and Tourism said on Thursday.
Beijing’s “zero-Covid” strategy and various demand and supply shocks are likely to result in another growth dip – the second after a major decline in the Covid-stricken first quarter last year, said analysts led by Lu Ting, Nomura’s chief China economist, in a note. Domestic visits and tourism revenues fell short of pre-pandemic levels by 12.8% and 21.4% during the Mid-Autumn Festival (19-21 September) just last month.
“Compared with Golden Week data last year, most indices contracted,” said Lu, adding that the only exception was movie box office sales. ”As an increasing number of nations choose to live with Covid, China’s zero-Covid strategy could be increasingly costly for the economy,” he added.
Homes Sales Plunge in Early October
The number of passenger trips during the holiday fell by 7.5% year-on-year, while new home sales declined by 37.6% in volume for the first six days of October from a year earlier, according to Nomura.
Baidu data showed expressways were less congested than last year.
Although retail sales grew slightly faster in September due to the release of pent-up demand following previous Covid-19 waves, the sluggish Golden Week data indicate that growth will likely slow again in October, Lu said.
This may add downside risks to Nomura’s below-consensus GDP growth forecasts, he added.
Prompted by China’s power crunch as a result of coal shortages and emissions controls enacted by Beijing, Nomura last month cut its year-on-year Q3 and Q4 GDP growth forecasts for China to 4.7% and 3.0%, respectively, from 5.1% and 4.4%.
It also cut the annual GDP growth forecast for 2021 to 7.7% from 8.2%.
Nomura expects Beijing’s ongoing emission controls, plus its “zero-Covid” strategy, and property sector curbs to lead to another quarter-on-quarter growth dip of 0.2% in Q3, after a 8.7% quarter-on-quarter decline in Q1 2020.
• By Iris Hong
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