BEIJING • China's factory output rose for the first time this year as the world's second-largest economy slowly emerged from its coronavirus lockdown, although consumption remained depressed amid increased job losses.

Industrial production climbed 3.9 per cent last month from a year earlier, data showed yesterday - more than the 1.5 per cent increase forecast in a Reuters poll of analysts and following a 1.1 per cent fall in March.

After months of lockdowns, China is reopening its economy as the outbreak on the mainland comes under control. The production of oil, coal, metals and electricity all increased as plants restarted operations last month.

However, China continues to face major challenges in its service sector, particularly retail, and as the pandemic sweeps the rest of the globe, affecting other major economies and trading partners.

Of particular concern for policymakers ahead of next week's annual meeting of Parliament is the prospect of a spike in unemployment, which poses significant political risks for the nation of 1.4 billion.

"Overall, this set of data shows only small and gradual improvements in economic activity, which could upset markets as China is seen as the 'first out' economy from Covid-19," said Ms Iris Pang, chief economist for Greater China at ING.

China's economy shrank for the first time since at least 1992 in the first quarter, as restrictions to curb the spread of the virus shut down factories and shopping malls.

Although much of the economy has reopened, many manufacturers are struggling with reduced or cancelled overseas orders as global demand falters. Earlier this week, data showed producer prices falling at their sharpest pace in four years, as industrial demand weakened.

While exports unexpectedly rose last month, driven in part by demand for medical supplies, imports saw a sharper-than-expected dive, signalling weak domestic demand.

More telling was a collapse in export orders seen in various factory surveys for April.

Ms Liu Aihua, a spokesman for the National Statistics Bureau, said unemployment pressure remained "relatively big". China's surveyed unemployment rate for April was 6 per cent, slightly higher than the previous month.

Ms Liu said the number of migrant workers - a significant part of the workforce and often not counted in official data - who had returned to their cities of employment from their home towns last month was at 90 per cent of levels seen in previous years.

However, Mr Julian Evans-Pritchard, senior China economist at Capital Economics, said that figure is probably closer to 80 per cent, suggesting true unemployment is double the official rate.

Those unemployment pressures are likely to strain household finances and prove a drag on consumption. Consumer spending remained weak last month with retail sales falling 7.5 per cent, faster than the forecast 7 per cent decline and extending the tumble in the first three months of the year.

Fixed-asset investment fell 10.3 per cent in January-April, compared with a forecast 10 per cent fall and a 16.1 per cent decline in January-March.

Private sector fixed-asset investment, which accounts for 60 per cent of total investment, fell 13.3 per cent in January-April, compared with an 18.8 per cent decline in the first three months of the year.

China's property sector, however, showed some resilience with real estate investment quickening last month while property sales fell at a much slower pace.

"Policymakers have signalled that further stimulus is in the pipeline, which should continue to boost infrastructure construction and industrial output," said Mr Evans-Pritchard. "But the recovery in consumption and service sector activity is likely to remain more drawn out."

REUTERS