China's May industrial output growth cools to 17-year low as trade war bites

China's industrial output grew 5 per cent in May 2019 from a year earlier, missing analysts' expectations of 5.5 per cent and well below April's 5.4 per cent.
China's industrial output grew 5 per cent in May 2019 from a year earlier, missing analysts' expectations of 5.5 per cent and well below April's 5.4 per cent.PHOTO: REUTERS

BEIJING (REUTERS) - China's industrial output growth unexpectedly slowed to a more than 17-year low in May, while investment also cooled, in the latest sign of weakening demand in the world's second-largest economy as the United States ramps up trade pressure.

Industrial output grew 5 per cent in May from a year earlier, data from the National Bureau of Statistics showed on Friday (June 14), missing analysts' expectations of 5.5 per cent and well below April's 5.4 per cent. It was the weakest reading since early 2002.

Fixed-asset investment also grew less than expected, reinforcing expectations that Beijing will need to roll out more growth-boosting measures soon.

Vice-Premier Liu He on Thursday stoked expectations of more stimulus as the US-China trade dispute intensifies, urging regulators to do more to boost the economy and saying Beijing has plenty of policy tools it can use.

Despite a slew of support measures since last year, China's cooling economy is still struggling to get back on firmer footing, and investors fear a longer and costlier trade war between the world's two largest economies could trigger a global recession.

Friday's data showed domestic demand remains sluggish, as suggested by weaker-than-expected import and bank lending data over the last week and gloomy May factory surveys.

SLOWING INVESTMENT

Fixed-asset investment rose 5.6 per cent in January-May from the same period a year earlier, decelerating from 6.1 per cent tipped in the Reuters poll and 6.1 per cent from January-April.

Private sector fixed-asset investment, which accounts for about 60 per cent of total investment in China, also showed signs of losing momentum. It rose 5.3 per cent, compared with a 5.5 per cent rise in the first four months of the year.

Infrastructure investment grew 4 per cent, slowing from 4.4 per cent.

 
 
 
 

Analysts have been closely watching for signs of a rebound in infrastructure investment as Beijing ramps up spending on road, rail and port projects, which would boost construction-related industries from steel mills to cement makers.

Real estate investment, a key economic growth driver, also showed signs of fatigue. It rose 11.2 per cent in the first five months, slowing from 11.9 per cent.

Retail sales bucked the downbeat trend, rising 8.6 per cent in May from a year earlier and picking up from a 7.2 per cent rise in April, which was a 16-year low.

Analysts surveyed by Reuters had expected a rebound to 8.1 per cent, but some said it was likely due to higher inflation rather than any turnaround in weak consumer confidence.

Earlier this week, China's auto association reported the worst-ever monthly drop in sales in the world's biggest vehicle market in May as the economy slowed and provinces implemented tougher emission standards.