China’s consumer spending and industrial activity grew at a slower pace than expected in April, adding to signs the recovery in the world’s second-largest economy is losing momentum.
Industrial production rose 5.6% from a year earlier, the National Bureau of Statistics said Tuesday, much lower than the 10.9% median estimate in a Bloomberg survey of economists. Retail sales climbed 18.4%, helped by a low base of comparison from last year, although still missing expectations.
Growth in fixed-asset investment slowed to 4.7% in the first four months of the year, also weaker than forecast. The urban jobless rate eased to 5.2%, but unemployment among young people reached a record high of 20.4%.
The headline figures were boosted by comparisons with April 2022, when Shanghai was in lockdown, resulting in a plunge in business and consumer activity at the time. Even so, the numbers were disappointing and suggest policymakers may need to step up support for growth.
“China’s recovery strength this year will likely be weaker than previously thought,” said Wu Xuan, chief market analyst at Tebon Fund Management. The PBOC might cut interest rates in the second half of the year to support growth, he said.
Chinese stocks were little changed as of 10:47 a.m. local time after earlier dropping as much as 0.4%.
The People’s Bank of China hinted Monday it will keep policy supportive, pledging “appropriate” levels in money supply and credit. Earlier Monday, it injected more long-term liquidity into the financial system, while keeping the rate on its one-year policy loans unchanged.
“Consumption remained solid, yet the spike in youth unemployment to a record high raises questions about how sustainable that recovery can be,” said Michelle Lam, Greater China economist at Societe Generale SA. “Today’s data opens the door for further cuts in the reserve requirement rate and interest rates, possibly in June. However, the key remains to boost confidence in the private sector and among households.”
The NBS highlighted global and domestic risks, saying “the global environment is still complex and grim, and domestic demand still looks insufficient.” The economy’s “internal drive for rebound is still not strong,” it said.
The housing market remains weak, the latest figures showed, another drag on the economy. While growth in property sales accelerated to 13.2% year-on-year in April, investment in the sector contracted 16.2%, according to Bloomberg calculations based on official data. Construction of new homes continued to decline.
The figures are in line with the trend from other recent data showing the economic recovery has waned after a strong start to the year. Property sales during the Labor Day holiday remained below pre-pandemic levels and consumers have cut back on mortgages. Consumer prices barely grew in April, while imports plunged, a sign of subdued domestic spending. Borrowing by households and companies also slumped last month.
What Bloomberg Economics Says...
The headline figures for production and retail sales rose – but only by comparison with last year’s terrible numbers, which cratered during Shanghai’s lockdowns. Measured against March, they are stalling. Meanwhile, slowing investment shows government spending isn’t gaining traction. Bottom line: The data are weak and add to the case for more monetary easing.
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Chang Shu and David Qu
The NBS data showed retail sales were buoyed last month by car purchases and restaurant spending. Auto manufacturing also boosted industrial output last month, although textiles and pharmaceuticals output continued to contract.
“Today’s weaker-than-expected data show how difficult it is to keep the growth engine running after restarting it,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “China will continue to deliver strong year-on-year growth of activity data in the second quarter of 2023 on the back of a low base, but at a slower quarter-on-quarter pace than the first quarter as the recovery is losing steam.”
--With assistance from Shikhar Balwani, Zhu Lin and Chester Yung.
(Updates with additional details.)
