China Industrial Output Recovers; Retail Sales Fall Less Than Expected

(RTTNews) - China industrial production logged a mild recovery in May and retail sales fell less than expected with the gradual relaxation of pandemic-related restrictions, official data showed on Wednesday.

According to the National Bureau of Statistics, industrial production rose 0.7 percent on a yearly basis in May, reversing the 2.9 percent fall in April. Production was forecast to drop 0.7 percent.

At the same time, the annual fall in retail sales slowed to 6.7 percent from 11.1 percent in April. Economists had forecast a 7.1 percent decrease for May.

During January to May, fixed asset investment gained 6.2 percent from the previous year, topping expectations of 6 percent increase. Meanwhile, property investment decreased 4 percent.

In May, the urban unemployment rate dropped to 5.9 percent, official data showed.

The virus situation remains a risk, Sheana Yue, an economist at Capital Economics, said. Even if further lengthy citywide lockdowns like that in Shanghai are avoided, the zero-Covid strategy means that targeted lockdowns will remain commonplace, depressing consumer activity and spending.

Coupled with headwinds to external demand, this will mean that the recovery will be tepid, the economist noted.

Elsewhere, the People's Bank of China injected CNY 200 billion into the system via one-year medium-term lending facility on Tuesday. The interest rate on the MLF was kept unchanged again at 2.85 percent.

The PBoC also conducted seven-day reverse repo of CNY 10 billion at an interest rate of 2.1 percent.

The central bank's decision does not imply there will be no change in the overall interest rate environment in China, Iris Pang, an ING economist, said. The economist expects the bank to cut the 5-year Loan Prime Rate on June 20, after reducing the same by 5 basis points to 4.45 percent in May.