China Consumption, Investment Slows Unexpectedly; Industrial Output Shines — Update
China's consumption and investment slowed unexpectedly in April, while industrial output beat expectations as Beijing doubled down on its manufacturing drive to spur growth amid a prolonged property slump and growing trade tensions with the West.
Retail sales, a major gauge of consumption, increased 2.3% in April from a year earlier, down from the 3.1% growth recorded in March and the 4.0% rise expected by economists surveyed by The Wall Street Journal.
China's fixed-asset investment rose 4.2% on the year in January-April, lower than the 4.7% expected by economists and the 4.5% increase recorded in the first quarter.
April's industrial output grew 6.7% on the year, up from a 4.5% increase in March, the National Bureau of Statistics said Friday. That was higher than the 5.5% growth expected by economists polled by The Wall Street Journal.
The mixed figures come as China's increased efforts to shore up the economy spark tentative optimism that the recovery is firming up. Green shoots have appeared in other data such as exports, but concerns remain about continued weakness in areas like consumer demand and the property sector.
China said on Monday that it would kick off the sale of a planned 1 trillion yuan ($138.53 billion) of ultralong bonds this week to better support the economy and fund strategic projects. The first batch of 30-year bonds worth CNY40 billion will be issued on Friday, according to official notice.
Many economists have expected the People's Bank of China to cut the amount of cash that banks must hold in reserve in the near term to free up liquidity to support the bond sale. Whether the central bank will restart bond trading--a policy tool it has rarely used the past two decades--in its open-market operations will be closely watched.
Markets are also monitoring any signs of further property easing, as more local governments unveiled plans this week to purchase housing inventories in a bid to warm up the moribund property market. Chinese leaders had signaled in an agenda-setting meeting in late April that they were studying new measures to reduce the country's excess housing supply.
The State Council, China's cabinet, is set to hold a press briefing on Friday afternoon on new policies to ensure the delivery of unfinished homes, with attendees to include senior officials from ministries responsible for housing and land supply, the central bank and the National Financial Regulatory Administration.
Data released last week also showed China's outbound shipments in April rose 1.5% from a year ago, reversing from a 7.5% drop in March. However, the outlook for exports has been clouded by concerns over a flood of Chinese goods in foreign markets. President Biden on Tuesday announced tariff increases on a range of Chinese products, including electric vehicles, one of China's most successful exports in recent years.
China's strong manufacturing sector is likely driven by external demand, evidenced by the growth in export volume, said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
Property prices and sales dropped further, likely weighing on household sentiment, he added.
"This set of macro data, combined with the weak credit data in April, may push the policy makers to take stronger actions to boost domestic demand," said Zhang, who sees the rising likelihood of a rate cut in the second quarter.
China's surveyed unemployment rate in urban areas stood at 5.0% in April, lower than the 5.2% rate seen in March and from a year ago, the statistics bureau said.
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