- Industrial output rises 0.7%, retail sales falls 6.7%
- Unemployment falls, but youth jobless rate rises to record
Bloomberg News
June 15, 2022
China’s economy showed a mixed recovery in May, with industrial production unexpectedly increasing while the property market continued to slump and consumer spending declined as Covid restrictions curbed sentiment.
Industrial output rose 0.7% from a year ago, reversing from a drop of 2.9% in April, data from the National Bureau of Statistics showed Wednesday. The median estimate in a Bloomberg survey of economists was for a contraction of 0.9%.
Retail sales slid 6.7% in the period, less than the 7.1% projected decline and better than April’s 11.1% plunge. Fixed-asset investment grew 6.2% in the first five months of the year. The surveyed jobless rate fell to 5.9% but the youth unemployment rate rose to a record 18.4%.
Some Covid restrictions in Shanghai were eased during the month, allowing factories to gradually resume production and logistics bottlenecks to ease. However, regular virus testing and other stringent controls continued to hinder consumer activity.
“Growth has bottomed, the recovery just started,” Morgan Stanley’s Chief China Economist Robin Xing said on Bloomberg Television. “It’s still a very incomplete and bumpy recovery, but we have seen the worst and the worst is behind them.”
Chinese stocks were the best performers in Asia on Wednesday. The benchmark CSI 300 Index climbed as much as 1.1% in early trading, but pared gains to 0.8% as of 10:11 a.m. local time. The onshore yuan strengthened as much as 0.4% while the yield on the 10-year government bonds was little changed at 2.82%.
The recovery in industrial output was helped by a rebound in the car sector as auto production centers like Jilin and Shanghai reopened, with car output rising to 1.99 million vehicles, up from 1.28 milllion in April. Electricity output fell 3.3% from a year earlier, while coal output jumped 10.3%.
“The national economy in May showed a good recovery momentum,” NBS spokesman Fu Linghui said at a briefing. “The situation of the pandemic prevention and control in China is turning for the better, production and demand gradually recovered, employment and prices were generally stable and major indicators improved marginally.”
What Bloomberg Economics Says…
Production swung to a modest expansion, buoyed by partial reopening in Shanghai, policy stimulus, and improved nationwide transportation links. Declines in retail sales narrowed.
Even so, the economy is still operating well below pre-pandemic levels and unemployment is high — with the youth rate hitting a record. We expect policy makers to continue to nurse the recovery with additional support.
Chang Shu and Eric Zhu
With outbreaks continuing to pop up in Shanghai and Beijing and curbs being reinstated to bring infections under control, the outlook for the economy’s recovery is uncertain. Last month’s somewhat subdued activity and signs of a weak recovery in June will weigh on growth and put the government’s full-year target of around 5.5% further out of reach.
The property sector continued to struggle, with home sales down 41.7% and investment falling 7.8% in May from a year earlier. The services economy continued to struggle, with restaurant and catering revenue dropping 21.1%, although that was an improvement from the 22.7% decline in April.
So far, Beijing’s stimulus has largely targeted businesses, with limited relief for consumers facing job losses and sliding incomes. The government last month rolled out a package of policies, including more tax breaks and loans for infrastructure projects.
The People’s Bank of China on Wednesday abstained from cutting a key policy interest rate, avoiding further policy divergence from the US that could add pressure on the yuan. The rate on the one-year medium-term lending facility was kept unchanged at 2.85%, in line with most forecasts.
— With assistance by John Liu, Lin Zhu, Yujing Liu, Shikhar Balwani, Fran Wang, and Xiao Zibang