(Bloomberg) -- China’s economy continued to recover in May, with accelerating industrial output growth leading the way while consumption remains in contraction.
Industrial output rose 4.4% from a year earlier, versus a median estimate of a 5.0% expansion. Retail sales fell 2.8%, compared to a projected 2.3% drop. Fixed-asset investment declined 6.3% in the first five months, versus a forecast 6% drop.The surveyed urban jobless rate fell to 5.9% from 6% the previous month.
Key Insights
The data signal that China’s economy continued to inch out of the virus-induced slump, supported by continued policy stimulus that’s driving credit growth.“The overseas epidemic situation and the world economic situation have become more severe and complicated, and the stable operation of the domestic economy still faces many risks and challenges,” the statistics bureau said in a separate statement.“The recovery is on the track while mixed performance can be observed everywhere - manufacturing still better than services, cars better than catering,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “However, the virus concerns will cloud the economic outlook, and it seems that we have to tone down a bit on Q2 growth, which I see at less than 1%.”While industrial production has rebounded from a contraction in February, private consumption is still shrinking and investment hasn’t rebounded.With the rest of the world in recession, exports dropping and China’s relations with the U.S. continuing to worsen, a rebound relies to a large extent on domestic consumption.“There’s no clear sign of recovery in retail sales. It’s quite clear that production has recovered pretty nicely, but the consumption, as well as investment actually are lagging behind,” Shen Jianguang, chief economist at leading online retailer JD.com Inc., said on Bloomberg television after the data. “So it’s the lack of demand that’s the main problem of the Chinese economy right now.”
What Bloomberg’s Economists Say...
The new surge in coronavirus cases raises the risk of a second wave of infections, which -- depending on the public reaction and the nature of the countermeasures -- could hold back the recovery. Supportive policy is likely to stay in place for an extended period. The main focus now is on making sure the stimulus gets traction.
Chang Shu and David Qu, Bloomberg Economics
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Output in the consumer goods sector shrank 0.6%, weaker than the 0.7% increase last month, the statistics bureau said, while export orders were “insufficient.” The value of delivered exports shrank 1.4%, and dropped more than 10% in some important sectors.Breakdown of retail sales: China May Retail Sales -2.8% Y/y; Est. -2.3%Breakdown of investment: China Jan.-May Fixed-Asset Investment -6.3% Y/y; Est. -6%Breakdown of industrial output: China’s May Electricity Output +4.3% Y/y; By Product
(Updates with economist comments)
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