Chinese consumers cut back on spending on everything but travel and restaurants this month, contributing to sluggish revenue growth in the country’s key economic sectors as the economy’s recovery loses steam.

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Almost every major sector experienced a weakening in both revenue and profit margin compared with June, led by a steep slide in retail, according to China Beige Book, a US-based data provider. Sales in the travel and food and drinks businesses increased, defying the trend due to continued “revenge spending,” the firm said.

China’s manufacturing, which has showed signs of improvement in the previous months, also faces mounting headwinds. While output barely rose from June, domestic orders slowed, according to the survey.

Export orders improved, mainly due to increased demand in Asia, while those from the US almost contracted and from Europe they slowed sharply, China Beige Book said.

Fiscal activities, however, increased in July, “sending bullish signals to investors hoping for more stimulus than seen so far in 2023,” the firm said. But previously-loose monetary conditions tightened for companies, with lenders rejecting loan applications far more frequently and at least nominally charging higher rates, it said.

Early economic data have shown that China’s recovery is likely to continue to slow in July. Growth already weakened in the second quarter with a property market slump, falling exports and sluggish retail sales pushing the economy to the brink of deflation. The country has introduced a slew of policies over the past few weeks to turn things around, including plans to boost consumption and to develop an exchange dedicated to helping small firms get access to funds.

At a key meeting earlier this month, China’s top leaders stopped short of promising strong monetary and fiscal stimulus. Instead, they signaled more support for the housing sector and a plan to address mounting local debt risks. They also vowed to enliven the capital market in what is seen as an attempt to help improve business and household confidence.

Consumer spending defies “hopes of any sustained rally into the summer,” China Beige Book said. “The economy is still trudging along and, if stimulus is going to rescue markets, it will have to be in August.”

Residential property sales improved in July as mortgage rates declined but commercial real estate remained weak, according to China Beige Book. The firm’s data is based on a survey of about 1,300 Chinese firms conducted between July 20 and 27.

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