(Yicai Global) Aug. 14 -- July's key economic indicators all show that China’s economy is on the road to recovery, according to a report released by the National Bureau of Statistics today.

Last month, industrial production grew steadily, there was an acceleration in demand, the retail sales of goods turned positive for the first time this year and the decline in investment in the manufacturing sector narrowed, it said.

Three factors contributed to the recovery in consumption in July, said Wu Chaoming, vice head of Chasing International Economic Institute. First, as the pandemic is now basically under control, spending is noticeably on the rise in various regions. Second, car sales, which make up about 10 percent of the total retail sales of consumer goods, surged 16.4 percent on the year in July, the highest gain so far this year and 4.8 percentage points more than June. This drove up total consumption growth by almost 2 percentage points. Third, earlier macro policies are starting to come into effect, stimulating an increase in consumer spending as economic rehabilitation quickens.

The total retail sales of consumer goods fell 1.1 percent on the year to CNY3.22 trillion (USD463.1 billion) last month, down 0.7 percentage points from June, according to the NBS. The retail sales of goods, one of the consumption groups, was up 0.2 percent on the year, shifting from negative to positive for the first time this year. Between January to July, the total retail sales of consumer goods decreased 9.9 percent from a year earlier to CNY20.45 trillion, narrowing the decline in the first six months by 1.5 percentage points, it added.

The sustained economic growth can be credited to four factors, Wu said. First, early monetary policy came into play. For example, total social financing amounted to more than CNY20 trillion (USD2.8 trillion) in the first half, CNY6 trillion more than in the same period last year. A huge amount of capital and a large number of infrastructure projects will drive faster growth in investment. Second, there is abundant space for fiscal policy in the second half. Third, increased domestic consumption and investment demand has become a strategic base point which will start to come into effect in the second half of the year. Fourth, overseas economic recovery is expected to continue, with China's export growth likely to be better than expected this year.

In July, value-added industrial output, which measures the activity of designated large enterprises with annual turnover of at least CNY20 million (USD2.8 million), grew by 4.8 percent year on year, similar to that of June. In the first seven months, value-added industrial output dropped by 0.4 percent year on year, an improvement of 0.9 percentage points from the first six months.

“In the first seven months, the investment in fixed assets (excluding rural households) was CNY32.92 trillion, down by 1.6 percent year on year, or a decline narrowed by 1.5 percentage points compared with that of the first six months,” the report said.

As the October week-long National Day holiday and other events approach, China is about to usher in another peak consumption season, with fast growth in cultural tourism and other services, said Zhao Ping, vice head of the Academy of China Council for the Promotion of International Trade. Overall, consumption is set to recover faster in the second half than the first half and drive economic growth more markedly.

Editors: Xu Wei, Kim Taylor