BEIJING: Growth in China’s factory output slowed for a third straight month in May, likely weighed down by disruptions caused by Covid-19 outbreaks in the country’s southern export powerhouse of Guangdong.
Retail sales and investment growth also came in below market expectations, but analysts say underlying activity still looks quite solid, noting headline readings remain highly distorted by comparisons to the pandemic plunge early last year.
The Chinese economy has largely shaken off the gloom from the coronavirus slump, but officials warn its recovery remains uneven amid challenges including soft domestic demand, rising raw material prices and global supply chain disruptions.
China’s rapid recovery last year and a US rebound this year have sharply boosted Asia’s export-reliant economies — Japan posted its strongest export growth in 41 years on Wednesday — but resurgent Covid infections and lockdowns are holding back broader-based recoveries.
Chinese industrial production rose 8.8% in May from a year ago, slower than the 9.8% uptick in April, National Bureau of Statistics data showed on Wednesday, missing a 9.0% on-year rise forecast by analysts from a Reuters poll.
In particular, the output of auto vehicles fell 4% from a year earlier, compared with an increase of 6.8% in April, crimped by a global chip shortage.
Retail sales rose 12.4% year-on-year in May, weaker than 13.6% growth expected by analysts and down from the 17.7% jump seen in April.
Chinese consumer and business confidence has been picking up thanks to pent-up demand and quickening vaccine rollouts, which are also reviving domestic tourism.
Two-year average growth for retail sales stood at 4.5% in May, faster than the 4.3% in April, in a sign that sales are gradually rebounding, Fu from NBS told reporters.
Fixed asset investment increased 15.4% in the first five months from the same period a year earlier, versus a forecast 16.9% rise, slowing from January-April’s 19.9% increase.
Notably, two-year average growth in manufacturing investment turned positive in May.
China’s unemployment rate also continued to drop. Nationwide urban jobless rate fell to 5.0% in May, the lowest since May 2019, from 5.1% in April.
On a month-on-month basis, Capital Economics estimated industrial output growth was unchanged at 0.5%, the pace of investment spending eased slightly and retail sales picked up.
However, Reuters calculations showed real estate investment in May rose at its slowest pace this year as more smaller towns joined bigger cities in trying to curb red-hot housing prices. New construction starts fell for a second month.
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