China’s April economic data test policymakers as economic recovery loses momentum

  • Industrial output, consumption and property investment show the economy is losing momentum
  • Both domestic and trade growth drivers remain in low gear
  • Analysts say high youth unemployment is ‘worrying’
  • Post-COVID-19 economic struggle fuels calls for further policy easing

BEIJING, May 16 (Reuters) – China’s industrial production and retail sales growth fell short of expectations in April as the economy lost momentum early in the second quarter and a shaky post-coronavirus recovery It suggested that pressure was mounting on policymakers to support

Tuesday’s set of figures, which also showed a further decline in property investment, added to worries about the outlook for the world’s second-largest economy, with domestic and export growth engines still underpowered.

Data released by the National Bureau of Statistics (NBS) showed industrial production grew 5.6% year-on-year in April, accelerating from a 3.9% pace in March. It was the fastest growth since September 2022, but well below the 10.9% growth forecast by analysts polled by Reuters.

Retail sales, an indicator of consumption, rose 18.4%, up sharply from 10.6% in March and the highest growth since March 2021. Analysts had expected a 21.0% increase.

The year-on-year figures were heavily distorted by the economic contraction last April, when financial hub Shanghai and other major cities were under strict virus lockdowns and curfews, leaving Asia’s giants in 2022. severely affected the growth of the year.

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

Economists at Nomura take a more bleak view, stating that “as the disappointment sets in, the risk of a downward spiral is increasing, resulting in weaker activity indicators, rising unemployment, sustained disinflation and market interest rates. We’re going to see a drop in prices, a weaker currency,” he said.

“YoY growth in the second quarter may still appear high due to the low base, but growth could slow significantly thereafter,” they said.

policy support

In fact, according to other data over the past week, reduction in imports Deepens in April Factory gate deflation and worse than expected bank loan With global growth slowing, suggesting weak domestic demand, pressure is mounting on policymakers to push for an economic recovery.

central bank of china fixed the interest rate But the commodity data also highlighted weaknesses across the economy, prompting markets to bet on further monetary easing in the coming months.

Daily average for this country coal productionBoth aluminum production and crude steel production in April decreased from the previous month.

Zhou Hao, an economist at Guotai Junnan International, expects the central bank to cut rates “because the economic downturn pressure remains.”

In late April, the Chinese Cabinet announced a plan to promote employment, trade The government missed last year’s target by a significant margin, but is on track to reach a modest growth target of around 5% in 2023.

Get out of the “sweet spot”

Offshore Chinese yuan fell to two-month low, while Australian dollar After a small early gain, it turned down on the disappointing data.

In addition to the broader demand woes, Chinese policymakers must contend with headwinds such as the recent failure of Western banks, rising global borrowing costs, high domestic debt and the war in Ukraine.

Fixed asset investment grew 4.7% year-on-year in the first four months of 2023, slowing from a 5.1% pace in the first quarter of 2023, data showed.

Private fixed asset investment increased by only 0.4%, in contrast to a 9.4% increase in investment by state-owned enterprises, indicating weak business confidence.

Reuters calculations based on official data showed investment in the real estate sector, a key pillar of the economy, fell 7.2% in March as investors remained cautious due to the still fragile economic conditions. Last month it decreased by 16.2% compared to the same month of the previous year. request.

Reuters Graphics

Recruitment among financially sensitive companies remained weak. The youth unemployment rate hit a record high of 20.4%, up from 19.6% in March, in what Zhiwei Zhang, chief economist at Pinpoint Asset Management, described as a “worrying sign.” .

“China is off the optimal spot to reopen its economy, and without decisive government action, hopes of a further recovery in sentiment may fade,” economists at Citi said in a note.

“Policymakers see a need to move from wait-and-see mode to aggressive easing, and expect a 20bps cut in policy rates this year.”

($1 = 6.9121 Chinese Yuan)

Reporting: Ellen Zhang, Joe Cash, Albee Zhang, Kevin Yao Editing: Shri Navaratnam

Our criteria: Thomson Reuters Trust Principles.

Joe Cash

thomson Reuters

Joe Cash reports on China’s economic developments, including domestic fiscal and monetary policies, key economic indicators, trade relations, and China’s growing engagement with developing countries. Prior to joining Reuters, he worked on UK and EU trade policy across the Asia-Pacific region. Joe studied Chinese at Oxford University and speaks Chinese.

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