China posts weaker growth in retail sales, industrial output

April data comes in lower than forecast amid consumer fears, escalating trade war with US

BEIJING • China yesterday reported surprisingly weaker growth in retail sales and industrial output for last month, adding pressure on Beijing to roll out more stimulus as the trade war with the United States escalates.

Clothing sales fell for the first time since 2009, suggesting that Chinese consumers were growing more worried about the economy even before a US tariff hike last Friday heightened stress on the country's struggling exporters.

Overall retail sales rose 7.2 per cent last month from a year earlier, the slowest pace since May 2003, data from the National Bureau of Statistics showed. That undershot March's 8.7 per cent and forecasts of 8.6 per cent.

The data suggests consumers are beginning to cut back spending on everyday products from personal care to cosmetics, and continuing to shun expensive items such as cars.

Hwabao Trust economist Nie Wen said: "Weak retail sales partially stemmed from a deterioration in employment and declining income of the middle-and low-income groups.

"In terms of future policies to keep consumption as the stabiliser of the economy, China might roll out targeted tax cuts or subsidies to the middle-and low-income groups."

As a whole, Chinese data for last month largely pointed to a loss of momentum after surprisingly upbeat March readings raised hopes that the economy was slowly getting back onto firmer footing and would require less support.

Growth in industrial output slowed more than expected to 5.4 per cent last month year on year, pulling back from a 41/2-year high of 8.5 per cent in March, which some analysts had suspected was boosted by seasonal and temporary factors.

Analysts polled by Reuters had forecast that output would grow 6.5 per cent.

China's exports unexpectedly shrank last month in the face of US tariffs and weaker global demand, while new factory orders at home and from abroad stayed sluggish.

 
 
 

Weighing on industrial output, motor vehicle production fell nearly 16 per cent. Earlier this week, industry data showed car sales in China fell 14.6 per cent last month, the 10th consecutive month of decline.

Mr Nie said China may need a more comprehensive cut in banks' reserve requirements next month before a Group of 20 summit where US President Donald Trump and his Chinese counterpart Xi Jinping are expected to talk trade.

"The funding gap in the market is relatively large," Mr Nie said, adding that smaller, more targeted reductions in bank reserves may no longer be enough to spur stronger growth.

There is relatively more room for policies to support growth, said Ms Liu Aihua, a spokesman for the statistics bureau, adding that employment is expected to remain steady.

The April nationwide survey-based jobless rate improved to 5 per cent from 5.2 per cent in March, though analysts are generally sceptical of Chinese employment data and see a rise in layoffs if export conditions deteriorate.

But yesterday's data also showed an unexpected stumble in investment. Fixed-asset investment growth slowed to 6.1 per cent in the first four months of this year. Analysts had expected it to rise 6.4 per cent from 6.3 per cent in the first quarter of this year.

Growth in infrastructure spending held steady at 4.4 per cent year on year in the January to April period, possibly reflecting a slower-than-expected payoff from Beijing's efforts to fast-track road, rail and port projects.

China is trying to engineer a construction boom to rekindle demand, even as it steps up support measures to keep cash-starved smaller companies afloat, ranging from tax cuts to financial incentives for firms which do not lay off staff.

Private-sector fixed-asset investment growth slowed sharply to 5.5 per cent from 6.4 per cent, suggesting that the sector continues to face difficulties despite central bank efforts to get more affordable loans to cash-strapped companies. The private sector accounts for the majority of jobs in China and about 60 per cent of overall investment.

One of the few bright spots was property investment. Real estate investment rose 12 per cent in April from a year earlier, unchanged from March, according to Reuters calculations.

REUTERS

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A version of this article appeared in the print edition of The Straits Times on May 16, 2019, with the headline 'China posts weaker growth in retail sales, industrial output'. Print Edition | Subscribe