China industrial output rebounds while consumers still wary
CHINA'S economy showed a mixed recovery in May, with industrial production unexpectedly increasing while the property market continued to slump and consumer spending declined as Covid restrictions curbed sentiment.
Industrial output rose 0.7 per cent from a year ago, reversing from a drop of 2.9 per cent in April, data from the National Bureau of Statistics (NBS) showed Wednesday (Jun 15). The median estimate in a Bloomberg survey of economists was for a contraction of 0.9 per cent.
Retail sales slid 6.7 per cent in the period, less than the 7.1 per cent projected decline and better than April's 11.1 per cent plunge. Fixed-asset investment grew 6.2 per cent in the first 5 months of the year. The surveyed jobless rate fell to 5.9 per cent but the youth unemployment rate rose to a record 18.4 per cent.
Some Covid restrictions in Shanghai were eased during the month, allowing factories to gradually resume production and logistics bottlenecks to ease. However, regular virus testing and other stringent controls continued to hinder consumer activity.
"Growth has bottomed, the recovery just started," Morgan Stanley's chief China economist Robin Xing said. "It's still a very incomplete and bumpy recovery, but we have seen the worst and the worst is behind them."
Chinese stocks were the best performers in Asia on Wednesday. The benchmark CSI 300 Index climbed as much as 1.1 per cent in early trading after the central bank's decision, but pared gains to 0.8 per cent as of 10.11 am local time. The onshore yuan strengthened as much as 0.4 per cent while the yield on the 10-year government bonds was little changed at 2.82 per cent.
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The recovery in industrial output was helped by a rebound in the car sector as auto production centres like Jilin and Shanghai reopened, with car output rising to 1.99 million vehicles, up from 1.28 milllion in April. Electricity output fell 3.3 per cent from a year earlier, while coal output jumped 10.3 per cent.
"The national economy in May showed a good recovery momentum," NBS spokesperson Fu Linghui said at a briefing. "The situation of the pandemic prevention and control in China is turning for the better, production and demand gradually recovered, employment and prices were generally stable and major indicators improved marginally."
With outbreaks continuing to pop up in Shanghai and Beijing and curbs being reinstated to bring infections under control, the outlook for the economy's recovery is uncertain. Last month's somewhat subdued activity and signs of a weak recovery in June will weigh on growth and put the government's full-year target of around 5.5 per cent further out of reach.
The property sector continued to struggle, with home sales down 41.7 per cent and investment falling 7.8 per cent in May from a year earlier. The services economy continued to struggle, with restaurant and catering revenue dropping 21.1 per cent, although that was an improvement from the 22.7 per cent decline in April.
So far, Beijing's stimulus has largely targeted businesses, with limited relief for consumers facing job losses and sliding incomes. The government last month rolled out a package of policies, including more tax breaks and loans for infrastructure projects.
The People's Bank of China on Wednesday abstained from cutting a key policy interest rate, avoiding further policy divergence from the US that could add pressure on the yuan. The rate on the 1-year medium-term lending facility was kept unchanged at 2.85 per cent, in line with most forecasts. BLOOMBERG
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