China’s economy continues to stumble along in an unconvincing fashion with the latest data for investment, factory output and retail sales all slowing in April, surprising analysts.
In fact apart from the continuing surge in property spending, there was enough red flags raised in the data to raise more doubts about whether the world’s second-largest economy is stabilising or sliding.
But much of April’s data included weaker-than-expected exports and imports, plus soft factory activity surveys, supports the belief that the Chinese economy is not rebounding, but at best drifting.
The remaining data point for April is the house price figures due out on Wednesday. They will confirm the property rebound is boosting prices (as Saturday’s figures showed they were boosting investment in the sector).
But they will also suggest a wider impact across the economy as a whole failed to show up in April.
Take retail sales – for months the indicator analysts looked to for signs the economy’s rebalancing was happening (weak production/strong retailing activity) as the services sector saw rising demand.
It is still there but the impact was nowhere near as strong in April as it was in March or in late 2015. But retail sales did rise 0.8% from March, which has been the monthly growth rate now for much of the past 10 months.
April’s retail sales (which includes both private and government purchases) rose 10.1% on an annual basis, slower than expected and sharply lower than the 10.5% rise reported in March. That was the slowest annual rate since May last year and well under the 11.2% rate reported for last November.
Tax cuts on cars with an engine capacity of 12.6litres or less. April saw the eighth monthly rise in sales in nine months, thanks to the cut which is due to end late this year.
Retail sales of cars, SUVs and multipurpose vehicles rose 6.4% to 1.72 million units last month, according to the China Passenger Car Association, to be up 6.7% at 7.36 million units in the first four months of this year.
The year plus monetary and administrative stimulus measures from the government is having an impact on the recovering property market which has also boosted demand for raw materials, giving a boost to long ailing heavy industries such as steel mills. But not coal mining where output fell heavily in April.
But even there, for Australian iron ore exporters the bloom is going off the recent mini-boom with prices falling 6% and more last week, on top of the 12% slide the week before. China’s steel production was up on a year ago at 69.42 million tonnes which was slightly lower than in March when just over 70 million tonnes was produced.
The only bright spot was investment in housing, which grew 9.7% percent in April from a year earlier, even with March’s pace. Certainly the higher level of activity in property had no impact on factory output which slowed to an annual growth rate of 6% in April from 6.8% in March, according to the National Bureau of Statistics. Analysts had forecast a rise of 6.5%. But it remains above the 5.4% increases reported in January and February.
China’s fixed-asset investment growth eased to 10.5% year-on-year in the January-April period, under forecasts for a 10.9%, and down from the first quarter’s 10.7%.
Fixed investment by private firms again fell, indicating private businesses remain wary of the small rebound seen in the March data. Investment by private firms rose 5.2% year-on-year in January-April, down from 5.7% in the first quarter.
“It appears that all the engines suddenly lost momentum, and growth outlook has turned soft as well,” Zhou Hao, economist at Commerzbank in Singapore, said in a research note quoted by Reuters. "At the end of the day, we have acknowledge that China is still struggling."
In its data announcement, the statistics bureau seemed to acknowledge that point when it commented “Because the total amount of private investment is relatively large, its continued slowdown could restrain stable growth, and requires a high degree of attention.”
