Economy perks up as industrial output rises

China’s economy continued to perk up in May with most of the major economic indicators edging up.

The value-added industrial output of major enterprises extended the rally, growing at a faster pace of 4.4 percent year on year in May, 0.5 percentage points higher than in April, data from the National Bureau of Statistics showed on Monday. 

On a month-on-month basis, industrial output rose 1.53 percent from April.

The country’s overall efforts to prevent and control the COVID-19 pandemic and promote economic and social development have continued to see positive results, said bureau spokesman Fu Linghui.

The resumption of work, production, business and market activities has advanced in an all-round way, Fu said, with the demand for production continuing to improve and employment and prices remaining generally stable. 

“Positive factors have gradually increased, and the economy continued to show signs of recovery as expected,” he said.

In the January-May period, major industrial enterprises posted value-added output falling 2.8 percent from the same period last year, compared with the 4.9 percent decline in the first four months.

The mining industry saw a 1.1 percent year-on-year growth in value-added output last month, manufacturing jumped 5.2 percent, and the electricity, heat, gas, water production and supply sectors advanced by 3.6 percent.

Output of the equipment manufacturing sector and the high-tech manufacturing industry in May grew by 9.5 percent and 8.9 percent, respectively, 5.1 percentage points and 4.5 percentage points faster than overall industrial output growth, indicating continuous optimization of the industrial structure, the bureau said.

According to securities firm Nomura: “Pent-up demand and catch-up production still played a key role in boosting industrial production for some major industrial products in May, although its strength is fading.” 

Specifically, output growth of autos and metal cutting machines in volume terms jumped to 19.0 percent year on year and 17.1 percent, respectively, in May from 5.1 percent and 11.4 percent in April. Smartphone output growth in volume terms also rose significantly to 8.4 percent year on year in May reversing the 2 percent drop in April.

“The industrial production growth, a key indicator of China’s secondary industry (which accounts for 39 percent of GDP), has been positive for two consecutive months, although at a moderate pace,” said Betty Wang, senior China economist of Australia and New Zealand Banking Group.

“If this trend continues in June, it is highly likely that China’s secondary GDP growth in the second quarter may return to positive territory, to about 5 percent year on year,” she added.

The service sector expanded 1 percent in May from a year earlier, reversing the 4.5 percent drop in the previous month, while for the January-May period it fell 7.7 percent year on year, compared with the decline of 9.9 percent in the first four months, according to the bureau.

Among them, information transmission, software and information technology services grew by 12.9 percent while the real estate industry rose 7.1 percent, respectively 7.7 percentage points and 6 percentage points faster than the figures in April.

Headline retail sales in nominal terms posted a 2.8 percent year-on-year decline in May but rebounding from the 7.5 percent drop in April. In real terms (excluding price factors), retail sales dipped by 3.7 percent year on year in May, compared with the 9.1 percent fall in the previous month.

By major product, auto sales growth ticked up to 3.5 percent year on year in May from 0 percent in April, in line with the data reported by the China Passenger Car Association, which indicated passenger car retail sales (by volume) grew 1.7 percent in May from a year earlier to reverse the 5.6 percent drop in April.

Sales of oil and oil products in May remained subdued to be 14 percent lower than the same period last year, despite an uptick from the 14.1 percent fall in April, “partly weighed on by the lagged effects of oil price declines in previous months,” said Lu Ting, chief China economist at Nomura.

Fixed asset investment growth rose to 3.9 percent year on year in May from 0.7 percent in April. In year-to-date terms, FAI fell 6.3 percent year on year, 4 percentage points slower than the decline in January-April. 

May’s rise in year-on-year FAI growth was led by infrastructure investment, the growth of which surged to 10.9 percent year on year last month from 4.8 percent in April. Manufacturing investment growth only improved modestly, dropping 5.3 percent in May compared with the 6.7 percent fall in the previous month. 

However, in the first five months 4.6 million new urban jobs were created, 1.37 million fewer than the same period last year. The urban unemployment rate surveyed in 31 major cities was 5.9 percent in May, up 0.1 percentage point from a month earlier.

“Although the main indicators continued to improve in May, there were still many indicators lower than those in the same period of 2019, indicating that the negative impacts of the pandemic still need to be made up and that the economy has not yet returned to normal levels,” NBS’s Fu said.

"We should continue to intensify the 'six stabilities' efforts (to stabilize employment, finance, foreign trade, foreign investment, investment and market expectations), and also ensure security in six areas referring to job security, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains, and the normal functioning of primary-level government," Fu said.