China’s April industrial output and retail sales growth missed expectations, suggesting the economy lost impetus at the start of the second quarter and putting pressure on policymakers to stabilize the post-COVID rebound.

As both its domestic and export development engines remain anemic, Tuesday’s report, which also showed a decrease in property market investment, offers little to assuage fears about the world’s second-largest economy.
Industrial output rose 5.6% in April from a year earlier, up from 3.9% in March, according to NBS data. It was the fastest growth rate since September 2022, although a Reuters survey of economists expected 10.9%.

Retail sales rose 18.4% from 10.6% in March, the highest growth since March 2021. Analysts predicted 21.0% retail sales growth.

In April 2022, Shanghai and other major cities were under strict anti-virus lockdowns, which drastically hindered growth in the Asian superpower.
“Today’s weaker-than-expected data show how difficult it is to keep the growth engine running after restarting it,” said Jones Lang Lasalle chief economist Bruce Pang.

“China will continue to deliver strong year-on-year growth of activity data in the second quarter on the back of a low base, but at a slower quarter-to-quarter pace than the first as the recovery is losing steam.”

Indeed, recent data over the last week indicating falling imports in April, widening factory gate deflation, and worse-than-expected bank loans showed weak domestic demand, putting pressure on policymakers to support the economic recovery as the global economy falters.

As expected, China’s central bank held the interest rate constant on Monday, but markets expect additional monetary easing in the coming months.

After the disappointing statistics, the Aussie dollar and the offshore Chinese yuan fell to a two-month low.

Chinese policymakers face headwinds from Western bank failures, rising global borrowing rates, and the Ukraine crisis on top of weak domestic and global demand. In addition, high domestic debt and an unstable property market remain concerns.

Fixed asset investment rose 4.7% in the first four months of 2023, below projections of 5.5%. January-March growth was 5.1%.

According to Reuters’ calculations based on government statistics, property investment, a major economic pillar, fell 16.2% year-on-year last month after a 7.2% decrease in March. However, investors remain cautious due to still-fragile demand.

Financially cautious enterprises didn’t hire. As a result, April’s survey-based unemployment rate was 5.2%, down from 5.3% in March.

However, the youth jobless rate rose to 20.4% from 19.6% in March, which Pinpoint Asset Management senior economist Zhiwei Zhang called a “worrying sign.”

Market analysts want more policy measures like consumption coupons to promote domestic demand, but the government seems unwilling. The government can wait because this year’s growth objective is low.

After failing last year, China has set a modest growth target of roughly 5% for 2023.