China’s Industrial Output Growth Slows in May, but Consumer Spending Picks Up
China’s industrial output growth slowed in May, but consumer spending picked up, according to official data released on Monday. The National Bureau of Statistics reported that industrial production expanded 5.8 per cent year on year, its slowest pace this year and down from 6.1 per cent growth in April.
The data highlights the uncertainty facing the world’s second-largest economy as it navigates a trade war with the US. China’s economy has struggled to boost consumer demand, which has become a priority for President Xi Jinping’s government as the economy contends with deflation and a property sector slowdown now well into its fourth year.
Retail sales grew 6.4 per cent, beating analysts’ forecasts and the fastest expansion since December 2023. However, the onset of a full-blown trade war with the US has added to pressures on China’s economy. Manufacturing activity, an important source of growth in recent years given weak consumer spending, declined in April and May. Exports to the US dropped 34 per cent last month, the steepest fall since the beginning of the Covid-19 pandemic.
According to The Financial Times, the US and China struck an agreement in London last week to preserve a truce in their trade war and lower tariffs from levels as high as 145 per cent. However, the additional levies and wider tensions between the powers continue to cast uncertainty over the global economic outlook.
Zichun Huang, China economist at Capital Economics, said that, while retail sales growth represented a “bright spot” in China’s economy, the recent trade war truce “was not enough to prevent a broader loss of economic momentum last month”. Slower industrial output growth was partly a result of “weaker external demand”, she added.
The health of the housing market is seen as an important gauge of domestic confidence. Data released on Monday showed continued pressure on the economy, years after a cash crunch set off a wave of defaults among Chinese property developers. Property investment has declined 10.7 per cent over the January-to-May period compared with the same period a year earlier. New home prices across 70 of China’s biggest cities dropped 0.2 per cent on average in May on a month earlier, faster than April’s decline, though the year-on-year fall of 4.1 per cent marked an improvement on last month’s rate.
Beijing has launched various supportive measures for the sector, including cuts to mortgage rates, a programme to use unsold properties as social housing and a drive to complete unfinished real estate projects. Analysts at Goldman Sachs said retail sales growth was supported by an earlier-than-usual online shopping festival in China, which they said “pulled forward some demand from June to May”. They forecast further policy easing measures in the second half of the year, given “prolonged property weakness, increased labour market stress and the unsustainability of export frontloading”.
The data also showed consumer prices fell 0.1 per cent in May, the fourth straight month of decline, adding to concerns over domestic demand. As The Financial Times reported, China’s economy is facing significant challenges, including a slowdown in the property sector and a trade war with the US.
Additional Data and Insights
Some analysts have expressed concerns over the impact of the trade war on China’s economy. According to The Financial Times, the trade war has resulted in a decline in exports to the US, with a 34 per cent drop in May. This has had a significant impact on China’s manufacturing sector, with manufacturing activity declining in April and May.
In response to the challenges facing the economy, Beijing has launched a range of supportive measures, including monetary policy easing and targeted support for specific sectors. However, analysts remain cautious about the outlook for China’s economy, citing the risks of a prolonged trade war with the US and a slowdown in the property sector.
Conclusion
In conclusion, China’s industrial output growth slowed in May, but consumer spending picked up, according to official data. The data highlights the uncertainty facing China’s economy as it navigates a trade war with the US and a slowdown in the property sector. While Beijing has launched supportive measures to boost the economy, analysts remain cautious about the outlook, citing the risks of a prolonged trade war and a decline in domestic demand.
As The Financial Times reported, China’s economy is facing significant challenges, including a slowdown in the property sector and a trade war with the US. The data released on Monday highlights the need for continued policy support to boost the economy and mitigate the risks facing China’s economy.
The source of this article is The Financial Times.
