China’s April economic data disappoint: recovery in domestic demand hits a snag
China faced a bit of a setback on the economic front in April, disappointing market expectations. While there was some positive news in terms of industrial output, other key indicators like retail sales and investment figures didn’t quite meet the mark.
China’s factories were buzzing, with industrial output growing by 6.7 per cent in April compared to the same time last year. This exceeded forecasts and hinted at improving demand, especially from international markets.
However, on the flip side, retail sales didn’t keep pace. They only increased by 2.3 per cent, the slowest growth since December 2022. This was a bit of a downer compared to March’s 3.1 per cent uptick and fell short of what analysts had predicted.
“Overall, the data releases for April indicate that the caution entrenched over the past several years will take some time to recover. As the weakness of the earlier published credit data hinted, today’s key activity data pointed to private-sector and household sentiment remaining downbeat and holding back overall growth,” said Lynn Song, Chief Economist, Greater China at ING.
“In 2024, growth will likely have to be driven by the public sector; fortunately, the policy rollout has begun, and the impact of supportive policies should gradually begin to trickle through the economy in the months ahead. There remains work to be done if China aims to hit its 5 per cent growth target in 2024.”
Investment numbers also missed expectations. Fixed asset investment grew by 4.2 per cent in the first four months of 2024, below the anticipated 4.6 per cent rise. The property sector, in particular, continued to be a drag on the economy.
New home prices saw the sharpest decline in over nine years, and property investment dropped by 9.8 per cent compared to the same period last year.
Despite these challenges, there were still some positive signs. Infrastructure and manufacturing investments, while slightly slowing down, continued to contribute positively to the economic landscape.
The urban unemployment rate remained at 5 per cent in April, with further breakdowns expected later. Overall, the data painted a mixed picture, urging Beijing to consider additional measures to support economic growth.
“The economic drag from the housing downturn may ease somewhat. Depending on how quickly they are rolled out, government efforts to destock unsold properties could provide some near-term support to new home sales. And with the labour market tightening again…consumer spending may regain some momentum,” said Zichun Huang, China Economist at Capital Economics.
“But none of this is likely to prevent a renewed slowdown further ahead, with property construction still on course to contract significantly over the coming years and China unlikely to continue rapidly gaining global export market share indefinitely.”