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Key Points
- Fears of economic slowdown in China: Data showed a slowdown in factory output and retail sales growth in April, missing economists’ expectations and sparking concerns about the strength of the post-COVID recovery.
- Industrial output below forecast: China’s industrial output grew by 5.6% year-on-year in April, significantly lower than the 10.9% expected by experts.
- Retail sales miss mark: Retail sales saw a year-on-year increase of 18.4% in April, failing to meet the projected 21% growth.
- Government stimulus likely: The weaker-than-expected data could prompt the Chinese government to introduce new stimulus measures to support the economy.
- Positive unemployment trend: The surveyed national unemployment rate in urban areas fell to 5.2% in April, down from 5.3% in March.
After a brief surge in economic activity, China’s post-COVID recovery appears to be losing steam, with April’s factory output and retail sales figures falling short of expectations. This slowdown has raised concerns among economists about the global economic outlook and could prompt Beijing to implement further stimulus measures.
Industrial Output and Retail Sales Disappoint
Official data released on Tuesday revealed a significant deceleration in China’s industrial output growth. In April, industrial output expanded by 5.6% year-on-year, a stark contrast to the 10.9% growth anticipated by a Reuters poll of analysts. This figure also represents a decrease from the 3.9% growth recorded in March.
Retail sales, a key indicator of consumer spending, also underperformed. While they saw an 18.4% year-on-year increase in April, this was below the 21.0% projected by economists. This suggests that the rebound in consumer confidence following the lifting of stringent COVID-19 restrictions may be more subdued than initially hoped for.
“The April data suggest that the cyclical recovery is past its peak,” said Julian Evans-Pritchard, head of China economics at Capital Economics. “The upshot is that the economy is still on track for a decent recovery this year, but it will likely be less strong than many currently expect. This weakness will probably result in more policy support.”
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Property Market and Fixed-Asset Investment
Further clouding the economic picture, property investment continued its decline, falling by 16.2% year-on-year in April. This marks the steepest decline since January-February 2023. Private sector fixed-asset investment also saw a deceleration, growing by only 0.4% in the first four months of the year, compared to a 0.6% increase in the first three months.
Despite these concerning trends, overall fixed-asset investment expanded by 4.7% in the first four months of 2023, slightly below the 5.5% growth forecast.
Positive Note: Unemployment Rate Declines
- National Surveyed Unemployment Rate in urban areas: 5.2% (down from 5.3% in March)
- Jobless Rate among 16-24 year olds: 20.4% (up from 19.6% in March, new record high)
On a more positive note, the surveyed national unemployment rate in urban areas fell to 5.2% in April, down from 5.3% in March. This indicates some improvement in the job market, though challenges remain, particularly in youth employment. The jobless rate for those aged 16-24, typically college graduates, reached a record high of 20.4% in April, up from 19.6% in March.
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