China's factories fire up but consumer, property weakness persists


A worker at a textile factory in Fuyang, eastern China. — AFP

BEIJING: China's factory output topped forecasts in April, helped by improving external demand, although retail sales unexpectedly slowed and the property sector remained a drag on the economy, piling pressure on Beijing to do more to support growth.

Industrial output grew 6.7% year-on-year in April, data released by the National Bureau of Statistics (NBS) showed on Friday, accelerating from the 4.5% pace seen in March and above expectations for a 5.5% increase in a Reuters poll of analysts.

However, retail sales, a gauge of consumption, rose just 2.3% in April, the slowest increase since December 2022, and were down from a 3.1% increase in March and far short of the 3.8% rise analysts anticipated in the poll.

"The strong manufacturing sector is likely driven by external demand, evidenced by the growth of export volume. Property prices and sales dropped further, which likely weighed on household sentiment," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

"This set of macro data, combined with the weak credit data in April, may push the policy makers to take stronger actions to boost domestic demand," he added.

Fixed asset investment expanded 4.2% in the first four months of 2024 from the same period a year earlier, versus expectations for a 4.6% rise. It grew 4.5% in first three months.

Economic data released earlier this month painted a mixed picture for April.

China's exports and imports returned to growth in April after contracting in the previous month while consumer prices rose for the third straight month.

Production of 3D printing equipment, new energy vehicles and integrated circuit products increased 55.0%, 39.2% and 31.9% year-on-year, respectively, NBS said.

Those impressive figures were all seen in sectors in which the U.S. has accused China of creating industrial overcapacity.

The mixed data reflects an uneven economic recovery in the world's second-largest economy and suggests policymakers will need to continue policy support to prop up growth.

China's new bank lending fell more than expected in April from the previous month while broad credit growth hit a record low.

The government has set an ambitious 2024 growth target of around 5%. China's economy expanded a faster-than-expected 5.3% in the first three months of this year.

China on Friday kicked off issuance of its 1 trillion yuan ($138.17 billion) of ultra-long special treasury bonds that will have tenors of 20 to 50 years to raise funds it will use to stimulate struggling industries.

New home prices fell at the fastest pace in over nine years in April, separate data showed on Friday, as efforts to prop up the ailing property sector show few signs of paying off.

Property investment fell 9.8% year-on-year in January-April, after declining 9.5% in January-March.

The property sector, which accounts for a quarter of the economy, has been hit by a regulatory crackdown and is still dragging down the overall economy.

The cities of Hangzhou, home of tech giant Alibaba, and Xian both lifted home purchase curbs earlier this month, the latest efforts by local governments to promote home sales.

China is also considering a plan for local governments to buy millions of unsold homes, Bloomberg reported earlier this week.

A meeting of Communist Party leaders last month called for measures to support the property sector, saying it will coordinate and improve policies to reduce housing inventories and optimise policy measures for new housing.

The job market improved with the nationwide survey-based jobless rate falling to 5.0% in April from 5.2% in March. - Reuters

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