Factory output, retail sales cool further in China
Growth in China's factory output slowed for a third straight month in May. Retail sales and investment growth also came in below market expectations.
The Chinese economy has largely shaken off the gloom from the coronavirus slump, but officials warn its recovery remains uneven amid challenges, including soft domestic demand, rising raw material prices and global supply chain disruptions.
China's rapid recovery last year and a US rebound this year have sharply boosted Asia's export-reliant economies – Japan posted its strongest export growth in 41 years yesterday – but resurgent COVID infections and lockdowns are holding back broader-based recoveries.
Chinese industrial production rose 8.8 percent in May from a year ago, slower than the 9.8 percent uptick in April, National Bureau of Statistics data showed yesterday, missing a 9.0 percent on-year rise forecast by analysts in a poll.
In particular, the output of auto vehicles fell 4 percent from a year earlier, compared with a 6.8 percent rise in April, crimped by a global chip shortage.
"This is a normal cyclical slowdown after an economic recovery," said Hao Zhou, senior EM economist Asia, Commerzbank.
"The extent of the slowdown in the second half is key. So far, it's still normal and there's still room for the fiscal policy to play a part later in the year."
Most analysts had expected some moderation in May output due to softer export orders, higher input costs for factories and tighter environmental restrictions on heavy industry.
Fu Linghui, an NBS official, said external risks also remain, such as still rising global COVID-19 infections, an uneven recovery in the world economy and spill-over effects from large stimulus programs from some countries.
Retail sales rose 12.4 percent year-on-year in May, weaker than 13.6 percent growth expected by analysts and down from the 17.7 percent jump seen in April.
Chinese consumer and business confidence has been picking up thanks to pent-up demand and quickening vaccine rollouts, which are also reviving domestic tourism.
Two-year average growth for retail sales stood at 4.5 percent in May, faster than the 4.3 percent in April, in a sign that sales are gradually rebounding, Fu from NBS told reporters.
Fixed asset investment increased 15.4 percent in the first five months from the same period a year earlier, versus a forecast 16.9 percent rise, slowing from January-April's 19.9 percent increase.
Notably, two-year average growth in manufacturing investment turned positive in May.
"What is gratifying is some weak indicators such as consumption and manufacturing investments are showing some improvement," Li Huiyong, deputy general manager at Hwabao WP Fund Management Co, adding that he expects the trend to continue.
China's unemployment rate also continued to drop. Nationwide urban jobless rate fell to 5.0 percent in May, the lowest since May 2019, from 5.1 percent in April.
On a month-on-month basis, Capital Economics estimated industrial output growth was unchanged at 0.5 percent, the pace of investment spending eased slightly and retail sales picked up.