China Industrial Output Gains Strength; Retail Sales & Investment Data Disappoints

(RTTNews) - China's industrial growth accelerated in April driven by robust exports but softening growth in retail sales and fixed asset investment reflects an uneven economic recovery necessitating more efforts from the part of the government to achieve the official growth target.

Industrial production registered an annual increase of 6.7 percent after rising 4.5 percent in March, the National Bureau of Statistics reported Friday. This was also better than the expected growth of 5.5 percent.

By contrast, retail sales growth slowed to 2.3 percent from 3.1 percent a month ago and also remained weaker than the 3.8 percent expected rise.

During January to April, fixed asset investment expanded at a slower pace of 4.2 percent from the previous year, following an increase of 4.5 percent in January to March period. Economists had forecast a faster increase of 4.6 percent.

Real estate investment declined 9.8 percent in the first four months of 2024.

Fixed asset investment is widely expected to improve with the issuance of CNY 1 trillion special long term government bonds today that is intended to fund strategic projects. Economists at Capital Economics said a renewed pick-up over the coming months is expected as fiscal support ramps up again.

However, economists noted that any near-term improvement is unlikely to be sustained for long given the underlying structural challenges facing the economy.

ING economist Lynn Song viewed that consumption growth is likely to remain moderate through most of 2024 as consumer confidence remains downbeat amid tepid wage growth and the lingering negative wealth effects from the past several years of declining asset prices.

A possible bottoming out of prices would also take some time before translating to stronger consumer activity, the economist noted.

The ING economist said there remains work to be done if China aims to achieve its 5 percent growth target this year.

The projections from the Organization for Economic and Co-operation and Development suggested that the government is likely to miss the official target of about 5 percent growth this year. The second-largest economy is forecast to grow 4.9 percent this year and 4.5 percent in 2025.

In the first quarter, the economy expanded at a faster pace of 5.3 percent as strong exports on the back of weaker currency helped to counteract the downturn in the property market.