BEIJING (Reuters) – China’s industrial output in May lagged behind expectations and a slowdown in the real estate sector showed no signs of abating, increasing pressure on Beijing to support growth, although retail sales beat expectations thanks to a holiday surge.
The wave of data released on Monday was largely pessimistic, underscoring the difficult recovery of the world’s second-largest economy.
Industrial production in May grew by 5.6% year-on-year, slowing from the 6.7% pace in April and below expectations for a 6.0% increase in a Reuters poll of analysts, National Bureau of Statistics data showed.
However, retail sales, a measure of consumption, rose in May by 3.7% year-on-year, accelerating from a 2.3% rise in April, marking the fastest growth since February. Analysts had expected a 3.0% expansion due to a five-day public holiday earlier in the month.
Ziwei Zhang, chief economist at Pinpoint Asset Management, said the imbalance “may be partly driven by the fact that there are two extra working days in April this year compared to last year, while the working days in May this year and last year are working days in… May of this year and last year. same”.
He added that policy easing measures in the housing sector have not yet boosted demand from home buyers at the national level.
Investment in fixed assets increased by 4.0% in the first five months of 2024 compared to the same period of the previous year, compared to expectations for a 4.2% increase. It grew by 4.2% from January to April.
Exports helped boost the economy, with steel and aluminum production recording sharp jumps in May.
“Exports have pushed industrial growth and investment in manufacturing significantly, but real estate weakness still weighs on household consumption and investment,” said Zhao Pingxing, chief China strategist at ANZ Bank.
The decline of China’s real estate market, high local government debt, and deflation continue to pose a heavy burden on economic activity. The latest figures indicate mixed growth, reinforcing calls for more fiscal and monetary policy support.
With tight interest spreads and a weak currency remaining major constraints limiting Beijing’s scope to ease monetary policy, China’s central bank left its key interest rate unchanged as expected on Monday.
“We still see the possibility of a key loan rate cut this month, especially over a 5-year period, as this will help banks retain mortgage loans to households,” said Zhou Hao, chief economist at Guotai Junan. international.
But Citi’s chief China economist Yu Xiangrong expects an overall interest rate cut of 20 basis points in the second half of this year, but no rate cut on June 20.
Asian stock markets were mostly softer after mixed Chinese data, with major Chinese stocks falling 0.2%.
Ownership data is getting worse
China’s economy grew at a faster-than-expected pace of 5.3% in the first quarter, but analysts say the government’s annual growth target of around 5% is ambitious as the real estate sector remains in the doldrums.
Real estate investments fell 10.1% year-on-year in the January-May period, deepening from a 9.8% decline in the January-April period.
New home prices fell 0.7% in May compared to April, marking the 11th consecutive monthly decline and the largest decline since October 2014, according to Reuters calculations based on Office for National Statistics data.
China’s real estate sector has been hit by regulatory measures, and the government reduced down payment requirements and eliminated the minimum mortgage interest rate.
Last month, the central bank announced an affordable housing re-lending program to speed up sales of unsold homes.
China’s exports grew faster than expected in May thanks to improving global demand, but import growth slowed significantly.
Tepid demand at home has also dampened consumer prices as confidence remains low in the face of the protracted real estate sector crisis. New bank lending rebounded much less than expected in May and some key money measures hit record lows.
The labor market was generally stable. The nationwide unemployment rate based on the survey was 5.0% in May, the same as in April.
The government pledged to provide more job opportunities related to major projects, introduced measures to boost domestic demand targeting youth, and pledged more financial stimulus to support growth.