China's economy was shaky even before the latest trade tensions hit

Kevin Frayer/Getty Images
  • China’s latest batch of economic indicators missed across the board in April.
  • Retail sales grew at the slowest annual pace since 2003. Industrial output and fixed asset investment also softened.
  • The data reinforces the view that Chinese policymakers will continue to roll out stimulus measures to support economic activity in the period ahead.

China’s latest batch of economic indicators missed across the board in April, reinforcing the view that policymakers will continue to roll out stimulus measures to support activity levels in the period ahead, especially at a time when trade tensions with the United States have escalated.

Retail sales were particularly weak, growing at the slowest annual pace since May 2003.

China’s National Bureau of Statistics (NBS) said retail turnover slowed to 7.2% from a year earlier, down sharply from 8.7% in March and well below the median economist forecast offered to Thomson Reuters for a far smaller deceleration to 8.6%.

The NBS reported that annual growth in jewellery, home appliances and telecommunications equipment all slowed sharply from 12 months earlier, while annual auto sales fell for an 11th consecutive month.

Like the retail result, figures on industrial output and fixed asset investment in urban areas also disappointed.

From a year earlier, industrial output grew by 5.4%, below the 8.5% pace seen a month earlier. That too undershot economist expectations for an increase of 6.5%.

While overall output growth slowed, crude steel production accelerated to 12.7%, up from 10% in the year to March. At 85.03 million tonnes, Reuters reported that month’s production was the highest on record, surpassing the previous record of 82.55 million tonnes set in October 2018.

“The strong annual growth rates in China’s steel-related sectors likely reflect the more relaxed stance on output restrictions in northern China compared to last year,” said Kevin Xie, China Economist at the Commonwealth Bank.

Output of steel products also improved marginally, increasing by 11.5% from a year earlier. That was despite car production tanking 18.8% from the levels reported in April last year.

“If industrial output continues to weaken in May and June, GDP growth will likely see significant slowdown,” Liu Xuezhi, an economist at Bank of Communications in Shanghai, told Bloomberg. “This rings an alarm bell on weak demand both at home and abroad — policymakers need to prioritise stabilisation.”

Rounding off the trio of data misses, investment in fixed assets rose 6.1% between January to April compared to the same period in 2018, short of the 6.4% growth eyed by economists.

From January to March, fixed asset investment grew at a faster 6.3% pace from a year earlier.

Investment in real estate development rose by 11.9% over the year, slightly faster than the 11.8% increase in the first three months of the year.

By sector, investment by private firms grew by 5.5%, down from 6.4% between January and March. The private sector accounts for around 60% of the total investment in fixed assets. In contrast, public sector investment increased to 7.8% from a year earlier, up from 6.7% in the first three months of the year.

“Today’s release points to some downside risks to the Chinese economy,” said Xie at the Commonwealth Bank.

“The April data reminds Chinese policymakers continued policy stimulus is needed to stabilise domestic demand amid escalating trade tensions with the US.”

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