- April Industrial Production +5.6% y/y vs f’cast +10.9%
- Retail sales +18.4% y/y vs f’cast +21.0%
- Fixed asset investment +4.7% y/y vs f’cast +5.5%
- Youth unemployment rate is very high
BEIJING, May 16 (Reuters) – China’s April industrial production and retail sales growth forecasts showed the economy lost further momentum early in the second quarter and added pressure on policymakers to boost the post-Covid recovery.
Tuesday’s data showing a decline in property market investment did little to assuage concerns about the world’s second-largest economy’s outlook as both its domestic and export growth engines languish.
Industrial production grew 5.6% in April from a year earlier, accelerating from the 3.9% pace seen in March, data released by the National Bureau of Statistics (NBS) showed. That was well below expectations for a 10.9% increase in a Reuters poll of analysts, but it marked the fastest growth rate since September 2022.
Retail sales rose 18.4%, their fastest increase since March 2021, accelerating from a 10.6% increase in March. Analysts had expected retail sales to grow 21.0%.
The year-on-year figures fell sharply last April when financial centers in Shanghai and other major cities were under strict anti-virus lockdowns and restrictions, which hit the Asian giant’s growth in 2022.
„Today’s weaker-than-expected data shows how difficult it is to keep the growth engine running after a restart,” said Bruce Pang, chief economist at Jones Lang LaSalle.
„China will continue to deliver strong year-on-year growth in activity data in the second quarter on the back of a lower base, but the recovery is losing steam at a slower quarter-to-quarter pace than the first quarter.”
Indeed, April’s shrinking imports, factory-gate deflation and worse-than-expected bank lending pointed to weaker domestic demand and increased pressure on policymakers to step up the economic recovery as global growth falters.
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 offshore Chinese yuan weakened to a two-month low as the Aussie dollar reversed early small gains to losses after encouraging data.
On top of weak domestic and global demand conditions, Chinese policymakers must contend with headwinds from recent Western bank failures, high global borrowing costs and the war in Ukraine. High domestic debt and a still shaky property market remain concerns.
The data showed fixed asset investment expanded 4.7% from the same period a year earlier, compared with expectations for a 5.5% rise in the first four months of 2023. It grew by 5.1% in the January-March period.
Investment in the property sector, a mainstay of the economy, fell 16.2% last month after falling 7.2% last month, according to Reuters calculations based on official data.
Hiring was low among companies wary of their finances. The nationwide survey-based unemployment rate was 5.2% in April, up from 5.3% in March.
But the youth unemployment rate rose to 20.4%, up from 19.6% in March, which Zhiwei Zhang, chief economist at Pinpoint Asset Management, described as a „worrying sign”.
„Some researchers in the market have called for policy measures such as consumption coupons to boost domestic demand, but the government is reluctant to do so. The growth target for this year is set at a low level, which leaves room for the government. Let’s wait and see.”
China has set a growth target of around 5% for 2023, having missed the target badly last year.
($1 = 6.9121 Chinese Yuan Renminbi)
Reporting by Ellen Zhang, Joe Cash, Albee Zhang and Kevin Yao Editing by Sri Navaratnam
Our Standards: Thomson Reuters Trust Principles.
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