BEIJING – China’s factory output growth slowed for a third month in a row in May, likely weighed down by disruptions caused by the COVID-19 outbreaks in the country’s southern export powerhouse Guangdong.
Retail sales and investment growth were also below market expectations, although analysts noted that headline readings remain heavily skewed by comparisons to the pandemic crash early last year.
The Chinese economy has largely shaken the sadness of the coronavirus-induced slide, but officials warn that its recovery remains uneven amid challenges including rising commodity prices and chain disruptions. global supply, especially chip shortage.
Industrial production grew 8.8% in May from a year earlier, slower than the 9.8% rise in April, data from the National Statistics Office showed on Wednesday.
That fell short of a 9.0% year-on-year increase forecast from analysts in a Reuters poll.
“This is a normal cyclical slowdown after an economic recovery. Simply put, we can see that the economic recovery is reaching its peak, ”said Hao Zhou, senior Asia emerging markets economist at Commerzbank.
“The extent of the slowdown in the second half is key. So far this is still normal and there is still room for fiscal policy to play a role later in the year. “
Most analysts expected some moderation in May production due to softer export orders, higher cost pressures for factories, production bottlenecks and tighter environmental restrictions for heavy industry. But they said China’s underlying economic activity still looks pretty strong, albeit somewhat uneven.
COVID-19 outbreaks in the Pearl River Delta since late May have paralyzed some key ports, Nomura economists said in a note to clients, though they believe the current spate of infections can be contained and delays are cleared in a relatively short period. time frame.
Fu Linghui, an NBS official, said external risks also persist, such as rising global COVID-19 infections, an uneven recovery in the global economy, and the spillover effects of large stimulus programs in some countries.
Retail sales rose 12.4% year-on-year in May, growth weaker than the 13.6% expected by analysts and below the 17.7% jump seen in April. Chinese consumer and business confidence has been recovering thanks to stifled demand and accelerating vaccine launches, which are also reviving domestic tourism.
Fixed asset investment increased 15.4% in the first five months compared to the same period of the previous year, compared to an expected increase of 16.9%, slowing the 19.9% increase from January to April.
“May economic data shows a similar picture to April, still lopsided recovery,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The good news is that the job market continues to be tight. We believe that it is not urgent for the government to change its political stance at this stage. “
The urban unemployment rate nationwide fell to 5.0% in May, the lowest since May 2019, from 5.1% in April.
Real estate investment in China also increased at a slower pace in May, as more small towns joined larger cities to try to curb red-hot house prices.
On a monthly basis, Capital Economics estimated that industrial production growth was unchanged at 0.5%, the pace of investment spending slowed slightly, and retail sales recovered.
In particular, the two-year average growth in manufacturing investment turned positive in May.
Previous data for May showed a somewhat mixed picture: export growth slowed but imports rebounded, driven by higher demand and commodity prices.
Rising commodity prices pushed China’s producer inflation to its highest level in more than 12 years, lowering profit margins for downstream and intermediate companies.
Bank lending rose unexpectedly in May, but broader credit growth continued to slow, a trend that analysts say could begin to weigh on activity in the second half of the year.
(Reporting by Gabriel Crossley, Stella Qiu; Additional reporting by Roxanne Liu, Edited by Kim Coghill)