An employee at a company manufacturing lithium batteries in Huaibei, in eastern China’s Anhui province. — AFP
BEIJING: China's factory output growth hit a six-month low in May, while retail sales picked up steam, offering temporary relief for the world's second-largest economy amid a fragile truce in its trade war with the United States.
The mixed data comes as China's economy strains under U.S. President Donald Trump's tariff onslaught following his return to the White House in January.
Industrial output grew 5.8% from a year earlier, National Bureau of Statistics data showed on Monday, slowing from 6.1% in April and missing expectations for a 5.9% rise in a Reuters poll of analysts. It was the slowest growth since November last year.
However, retail sales, a gauge of consumption, rose 6.4%, much quicker than a 5.1% increase in April and forecasts for an expansion of 5.0%.
Data released earlier this month showed exports to the U.S. plunged 34.5% in May from the previous year, the sharpest drop since February 2020, while deflationary pressures deepened last month.
Retail sales had shown resilience on the back of strong Labour Day holiday spending and a consumer goods trade-in programme heavily subsidised by the government.
An extended "618" shopping festival, one of China's largest online retail events by sales, which had started earlier than usual this year, also helped drive consumption.
Fixed asset investment expanded 3.7% in the first five months of this year from the same period a year earlier, compared with expectations for a 3.9% rise. It grew 4.0% in the January to April period.
"The tariff truce may not be conducive enough for an immediate rebound in manufacturing investment," economists at Citi said in a research note.
Despite reaching an agreement to temporarily walk back much of their triple-digit tariffs after trade talks in Geneva in May, the world's two largest economies were at odds again over a raft of export controls that had throttled each other's key supply chains.
Trump last week said a trade deal that restored a fragile truce in the U.S.-China trade war was done, a day after negotiators from Washington and Beijing agreed on a framework covering tariff rates.
That means the U.S. will charge Chinese exports a total of 55% tariffs, he said. A White House official said the 55% would include pre-existing 25% levies on imports from China that were put in place during Trump's first term.
Beijing last month rolled out a package of stimulus measures, including interest rate cuts and a major liquidity injection, aimed at shielding the economy from the hit from U.S. tariffs.
However, analysts continued to flag challenges for China in hitting its growth target of roughly 5% this year and warned imminent stimulus was unlikely. - Reuters
