"China's Consumption Decelerates as Retail Sales Lag"

The National Bureau of Statistics reported a 2.3% increase in retail sales compared to the previous year. Industrial production exceeded expectations, growing by 6.7% year-on-year. However, fixed asset investment for the first four months only rose by 4.2%, falling short of the anticipated 4.6% rise. Additionally, China planned to commence a six-month program on Friday to issue long-term bonds for funding strategic projects.

China released data on Friday indicating a slowdown in consumer growth alongside continued strength in industrial activity. The National Bureau of Statistics reported a 2.3% increase in retail sales in April compared to the previous year, falling short of the 3.8% forecast and slower than the 3.1% pace recorded in March.

In April, industrial production in China surged by 6.7% compared to the previous year, surpassing expectations of 5.5% growth and showing a significant improvement from the 4.5% recorded in March. However, fixed asset investment for the first four months of the year only increased by 4.2%, below the anticipated 4.6% rise.

Real estate investment continued its downward trend, showing a year-on-year decline of 9.8% for the first four months of 2024. Infrastructure and manufacturing investment experienced a slight deceleration compared to March levels. In April, the urban unemployment rate stood at 5%, with age-specific data expected to be released shortly after the overall report.

During a recent holiday period from April 29 to May 3, retail sales in China experienced a 6.8% year-on-year growth, as reported by the Ministry of Commerce. Home appliance sales surged by 7.9%, while automobile sales climbed by 4.8%, fueled by nationwide trade-in incentives. 

The Ministry highlighted overall improvements in industry indicators, exports, employment, and prices, with new growth drivers sustaining rapid expansion. However, Bruce Pang at JLL noted that some consumers, uncertain about their future income and other factors, may remain cautious about spending.

Bruce Pang from JLL highlighted that improving employment data and growing services consumption suggest potential future improvements in retail sales. However, China's statistics bureau noted that April figures were influenced by the May 1 Labor Day holiday and last year's high base. Liu Aihua, a spokeswoman for the bureau, explained that last year's holiday spanned April and May, while this year it started on May 1. She also mentioned that the real estate sector is still undergoing adjustment.

China commenced a six-month program to issue long-term bonds for funding strategic projects, with expectations for the economic impact to be felt predominantly in the first half of the following year, according to Oxford Economics. The issuance of ultra-long bonds could enhance market confidence, Liu stated.

In April, exports increased by 1.5% year-on-year, in line with expectations, while imports surged by 8.4%, exceeding expectations. Consumer prices saw a slight uptick, but factory-level prices continued to decline. New loan data for April decreased significantly, partly due to changes in data measurement and sluggish demand from businesses and households.

Despite a prolonged slump in the real estate sector, with many pre-sold apartments still under construction, some cities have relaxed housing purchase restrictions to stimulate sales. Housing policy details were expected to be discussed in a press conference by officials from the housing ministry, central bank, and financial regulator.

Dan Wang, chief economist at Hang Seng Bank (China), anticipated the stabilization of China's property market by the end of next year, attributing it to successful policy implementation. Despite challenges in the real estate sector, the overall economy has demonstrated resilience, supported by industrial investment and manufacturing.

China's official GDP grew by 5.3% in the first quarter, surpassing expectations, with a target of around 5% GDP growth set for 2024. The EU Chamber of Commerce in China views recent economic pressures as cyclical, emphasizing the importance of increased domestic demand for foreign businesses.

During a holiday period from April 29 to May 3, retail sales in China expanded by 6.8% year-on-year, according to the Ministry of Commerce, driven by growth in home appliance and automobile sales fueled by nationwide trade-in incentives.

Source: CNBC‍