China's factory output growth slows

BEIJING • China's factory output growth slowed last month and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world's second-largest economy.

While China's exporters are enjoying strong demand, global supply chain bottlenecks and rising raw materials cost have weighed on production, cooling the blistering economic recovery from last year's Covid-19 slump.

Factory output grew 9.8 per cent last month from a year ago, in line with forecasts but slower than the 14.1 per cent surge in March, National Bureau of Statistics data showed yesterday. Retail sales, meanwhile, rose 17.7 per cent, much weaker than a forecast 24.9 per cent uptick and the 34.2 per cent surge in March.

NBS spokesman Fu Linghui said that while China's economy showed steady improvement last month, new problems are emerging, notably the rise in international commodity prices.

"The foundations for the domestic economic recovery are not yet secure," he told a news briefing in Beijing yesterday.

"For companies as a whole, price increases are conducive to the improvement of corporate efficiency, but the pressure on downstream industries needs to be paid attention to."

China's factory price inflation hit its highest pace since October 2017 last month. That could rise further in the second and third quarters, according to a report from the central bank last week.

The slower growth rates in the April activity indicators were also due to the fading base effects as year-on-year comparisons rolled away from very sharp declines seen when the coronavirus shut down much of the country early last year.

In the factory sector, motor vehicle production growth fell sharply to 6.8 per cent from 69.8 per cent, due in part to the base effect as well as critical shortages of semiconductors used in car systems.

Growth in the production of cement slowed last month and coal production fell, although aluminium and crude steel output hit record highs, helped by firm demand.

"China's economy shows signs of unbalanced recovery: strong exports and domestic investment on the one hand, but weak consumption on the other," said Mr Zhang Zhiwei, chief economist at Pinpoint Asset Management, in a note.

Sectors related to travel, leisure and entertainment are large employers and still held back by Covid-19 uncertainty, he added.

Home appliance sales growth plunged last month to 6.1 per cent, from 38.9 per cent in March, NBS data showed.

Mr Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note that month-on-month retail sales growth fell well below its pre-pandemic pace.

"Looking ahead, we think the rebound in consumption should gather pace again in the coming months as the labour market continues to tighten."

China's economy expanded a record 18.3 per cent in the first quarter, and many economists expect growth to exceed 8 per cent this year.

REUTERS