Economic growth stable for first 4 months

China’s economic growth moderated in April but was stable over the first four months with steady production growth in the service sector, according to the National Bureau of Statistics.

The service production index grew 7.4 percent year on year in April, 0.2 percentage points slower than the previous month but 0.1 percentage point faster than in the first two months. For January-April period, the index rose 7.4 percent from the same period last year, unchanged from the figure in the first quarter.

In April, the information transmission, software and information technology services sector, and the leasing and business services industry grew by 25 percent and 8.1 percent, respectively, outpacing the national services production index by 17.6 and 0.7 percentage points. 

Industrial production growth fell to 5.4 percent year on year in April compared with the 8.5 percent in March, weaker than the market expectation of 6.5 percent, but up 0.1 percentage points from the January-February period. 

"The fluctuation in the month-on-month growth rate of industrial production was mainly due to the Spring Festival holiday, the adjustment of value-added tax rate and the change of base figure in the same period," said Jiang Yuan, a senior statistician at the bureau.

"However, from the point of view of the cumulative growth rate, the industrial production still ran steadily," Jiang added.

For the first four months, the value-added industrial output of major enterprises rose by 6.2 percent from a year earlier, flat from the pace for the whole of 2018.

Nomura said the year-on-year fall in April was mainly driven by mining and manufacturing sectors, where industrial output growth dropped to 2.9 percent and 5.3 percent, respectively, from 4.6 percent and 9 percent in March. The figure in the utilities sector rose to 9.5 percent year on year in April from 7.7 percent in the previous month.

The high-tech manufacturing sectors jumped 11.2 percent last month from the same period last year, 5.8 percentage points faster than the overall figure for the industrial production of major enterprises.

Retail sales of consumer goods in April totaled 3,058.6 billion yuan, up 7.2 percent year on year to post a 1.5 percentage points drop from the previous month.

"The decline was mainly affected by the Labor Day holiday. If excluding this factor, the consumer goods market will still maintain steady growth in general," said bureau statistician Zhang Min.

By major product, growth of auto sales remained sluggish to drop by 2.1 percent year on year in April, despite a rise from the 4.4 percent decline in March. 

Sales growth of oil and oil products slumped to 0.1 percent from 7.1 percent, partly driven by a recent moderation in year-on-year oil price inflation (Brent oil price inflation fell to negative 0.4 percent year on year in April from 0.4 percent in March), Nomura said.

Fixed asset investment growth slowed on weak manufacturing and infrastructure investment to 5.7 percent year on year last month, down from 6.4 percent in March, taking year-to-date growth down by 0.2 percentage points to 6.1 percent, unchanged from the January-February period but 0.2 percentage points faster than last year. 

Investment in high-tech manufacturing and services increased 11.4 percent and 15.5 percent respectively, outpacing the headline FAI by 5.3 percentage points and 9.4 percentage points, according to the bureau.

Meanwhile, property investment held up well in April, with a big jump in developers’ funding conditions, Australia and New Zealand Banking Group said.

Property investment growth rose to a new high since 2015 at 11.9 percent year on year over the first four months. During the same period, growth of developers’ funding, which holds the key to property investment, also jumped to 8.9 percent, the fastest in 20 months, as bank loans, advance payments, and mortgages grew at a quicker pace. 

"This is also consistent with our observations of the rebound in home sales, which increased 0.4 percent year on year in January-April, representing the first positive year-on-year growth this year," said Betty Wang, senior China economist at ANZ Group.

"We maintain our view that property investment in China will remain stable for 2019, despite recent tightening in a few cities."

Lu Ting, chief China economist at Nomura, expects headline activity data to slightly pick up in May due partially to front-loading of exports to the US as a response to a possible 25 percent tariff hike to the US$300 billion China’s exports to the US. 

"We expect Beijing to significantly ramp up easing or stimulus measures to stabilize financial markets and bolster growth," Lu said.

ANZ's Wang also expects China to roll out more supportive measures to shore up sentiment and maintain economic resilience. 

"However, rather than using broad-based monetary easing and policy rate cuts, we believe that Chinese policy-makers will favor targeted monetary policies, industrial subsidies, and fiscal policy including tax cuts to counter the downside risks," Wang said.