China’s May industrial output misses forecasts, retail sales a bright spot

The industrial data released on Monday by the National Bureau of Statistics (NBS) came in below expectations for a 6.0% increase in a Reuters poll of analysts.

However, retail sales, a gauge of consumption, in May rose 3.7% on year, accelerating from a 2.3% increase in April and marked the quickest growth since February. Analysts had expected retail sales to grow 3.0% due to the five-day public holiday earlier in the month.

Fixed asset investment expanded 4.0% in the first five months of 2024 from the same period a year earlier, versus expectations for a 4.2% rise. It grew 4.2% in the January to April period.

China’s property market downturn, high local government debt and deflation remain heavy drags on economic activity. The latest figures point to an uneven growth that reinforces calls for more fiscal and monetary policy support.

With narrowing interest margins and a weakening currency remaining key constraints limiting Beijing’s scope to ease monetary policy, China’s central bank left a key policy rate unchanged as expected on Monday. The world’s second-largest economy grew faster than expected at 5.3% in the first quarter, but analysts say the government’s around 5% annual growth target is ambitious. China’s exports grew faster than expected in May helped by improved global demand, but imports growth slowed significantly.

Tepid demand at home has also kept a lid on consumer prices as confidence remains low in the face of a protracted property sector crisis. New bank lending rebounded far less than expected in May and some key money gauges hit record lows.

Property investment fell 10.1% year-on-year in January-May, deepening from a decline of 9.8% in January-April.

China’s property sector has been hit by a regulatory crackdown and the government has slashed down payment requirements and cancelled the floor rate for mortgage interest rate.

The central bank last month announced a relending programme for affordable housing to accelerate sales of unsold housing stock.

The job market overall was steady. The nationwide survey-based jobless rate hit 5.0% in May, the same as that in April.

The government has vowed to create more jobs linked to major projects, roll out measures to promote domestic demand targeted at youths and has pledged greater fiscal stimulus to shore up growth.