China’s economy showed a spark of improvement in May, but consumers beware
China’s economy showed signs of recovery in May, as industrial output unexpectedly increased last month. But consumption was still weak, underscoring the challenge for policymakers amid continued pullbacks from strict COVID restrictions.
However, the data does provide a path for reviving growth in the world’s second-largest economy, as businesses and consumers in dozens of cities were hit hard by complete or partial lockdowns in March and April, including a prolonged one in commercial hub Shanghai. Shutdown was also included.
Data from the National Bureau of Statistics (NBS) showed that industrial output grew by 0.7 per cent in May from a year earlier, falling by 2.9 per cent in April. That compared to a 0.7 percent drop expected by analysts in a Reuters news agency poll.
The easing of COVID restrictions and strong global demand boosted the industrial sector. China’s exports grew at a double-digit pace in May, shattering expectations as factories restart and easing logistics snag.
The mining sector led with a 7 per cent increase in production in May from a year ago, while the manufacturing industry posted a modest 0.1 per cent growth, mostly driven by new energy vehicles production, up 108.3 per cent year-on-year. Enhanced.
“Overall, the economy of our country overcame the adverse impact of COVID [in May] NBS spokesman Fu Linghui told a news conference, and was showing the pace of improvement, adding that he expected the revival to improve further in June because of policy support.
“However, the international environment is still complex and grim, with more uncertainties from outside. Our domestic recovery is still in its early stages with key indicators rising at lower levels. The foundations of the recovery have not yet been consolidated. “
retail sales fall
That caution was underscored in consumption data, which remained weak as shoppers confined to their homes in Shanghai and other cities. Retail sales fell 6.7 percent in May from a year ago, on top of an 11.1 percent contraction the previous month.
They were slightly better than forecast for a decline of 7.1 per cent due to increased spending on basic goods such as cereals, oil as well as food and beverages.
Industry data shows China sold 1.37 million passenger cars last month, down 17.3 percent from a year ago, marking a 35.7 percent drop in April.
Real estate investment, a key indicator tracked by policymakers for propelling the economy, rose 6.2 per cent in the first five months, compared to a 6 per cent growth and 6.8 per cent growth in the first four months.
China’s asset sales fell at a slower pace in May, separate official data showed on Wednesday, supporting easing policy steps to boost demand amid tighter COVID-19 restrictions.
The government is accelerating spending on infrastructure to boost investment. China’s cabinet has also announced a package of 33 measures, covering fiscal, fiscal, investment and industrial policies, to revive its pandemic-ravaged economy.
The nationwide survey-based unemployment rate fell to 5.9 percent in May from 6.1 percent in April, still well above the government’s 2022 target of 5.5 percent. Notably, the unemployment rate in 31 major cities in the survey rose to 6.9 percent, the highest on record.
Some economists expect employment to get worse before it gets better, with record numbers of graduates entering the workforce in the next three months.
China has targeted annual economic growth of around 5.5 percent this year, but many economists believe that is increasingly out of reach.
Chinese banks extended 1.89 trillion yuan ($281 billion) in new loans in May, nearly three times more than in April and beating expectations. But 38 percent of new monthly loans were in the form of short-term bill financing, indicating that real credit demand still remains weak.
The central bank on Wednesday kept the medium-term policy rate unchanged for the fifth consecutive month in line with market expectations.
fear of new lockdown
While the world’s biggest producer posted better-than-expected growth in exports in May, weak external demand due to the Ukraine war and strong production recovery from Southeast Asian countries threaten the country’s trade outlook.
The fears of a new lockdown under China’s zero-covid policy are also big.
A week after Shanghai reopened, the local government ordered 15 of the city’s 16 districts to conduct mass testing after a surge in cases linked to hair salons.
Officials in Beijing warned on Tuesday that the city of 22 million was in a “race against time” to be hit by its most severe outbreak since the pandemic began.
Analysts say the risks of any possible lockdowns and supply-chain disruptions amid the COVID-19 outbreak in the future could hamper the economy’s rebound as Beijing looks to ease its zero-COVID policy. No signal is shown.
After China’s economy sparked a recovery in May, consumer caution was the first to appear on Al Jazeera.
