Monday, May 29, 2023

Industrial production and retail sales highlight China’s fragile recovery

BEIJING (Reuters) – China’s industrial production and retail sales growth came in below forecasts in April, suggesting the economy slowed at the start of the second quarter and policymakers on monetary policy after the impact of COVID-19 The pressure to shore up the faltering recovery mounted.

Tuesday’s data, which also showed a decline in investment in the real estate market, did not help dispel doubts about the outlook for the world’s second-largest economy, as both domestic and export growth remained insufficient.

According to data published by the Office for National Statistics, industrial production grew by 5.6% in April compared to the previous year, compared to 3.9% recorded in March. The growth was well below expectations of 10.9% according to a Reuters poll of analysts, although it marked the fastest growth rate since September 2022.

Retail sales rose 18.4%, up 10.6% in March on track for its fastest growth since March 2021. Analysts had expected growth of 21.0%.

The year-on-year figures were hit hard last April, when the financial hub of Shanghai and other big cities were subjected to strict lockdowns and restrictions against the coronavirus, which could severely hit the Asian giant’s growth in 2022. was affecting

“Today’s weaker-than-expected data shows how difficult it is to keep the growth engine going once you restart it,” said Bruce Pang, chief economist at Jones Lang LaSalle.

“China continues to post strong year-over-year growth in activity data in the second quarter on a low base, but a slower quarter-over-quarter pace than in the first quarter as recovery runs out of steam.”

Indeed, other data from the past week, such as a contraction in imports in April, worsening deflation in factories and worse-than-expected bank credit, weakened domestic demand, are mounting pressure on economic leaders to strengthen the economic recovery as global growth falters. Point to the pressure.

China’s central bank kept interest rates unchanged on Monday, as expected, but markets are betting on further easing in the coming months.

high youth unemployment

The Chinese yuan weakened to a two-month low, while the Australian dollar turned to losses from modest early gains after disappointing data.

In addition to fragile domestic and global demand conditions, Chinese economic policymakers also have to contend with recent failures of Western banks, rising global borrowing costs and headwinds created by the war in Ukraine. High household debt and a still-volatile real estate market also remain a matter of concern.

The data also showed that investment in fixed assets increased by 4.7% in the first four months of 2023 compared to the same period last year, against an expectation of 5.5% growth. It grew by 5.1% in the January-March period.

Investment in the real estate sector, a key pillar of the economy, plunged 16.2% last month after falling 7.2% in March, according to Reuters calculations based on official data, as investors remain cautious as they still face fragile demand. .

Hiring remained low in companies that were careful with their finances. The national unemployment rate based on surveys stood at 5.2% in April, down slightly from 5.3% in March.

But the youth unemployment rate rose to an all-time high of 20.4% from 19.6% in March, which Zhiwei Zhang, chief economist at Pinpoint Asset Management, called a “worrying sign.”

“Some market watchers are calling for more economic support measures such as consumer coupons to boost domestic demand, but the government seems reluctant to do so. The growth target for this year has been set at a lower level, Which leaves the government room to wait and see.

China has set a modest growth target of around 5% in 2023, after largely missing last year’s target.

(1 US dollar = 6.9121 Chinese yuan renminbi)

Nation World News Desk
Nation World News Desk
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