China’s economic growth slows as consumers remain cautious
BEIJING – China’s economic growth moderated in May as flattering comparisons to economic numbers hit by the pandemic early last year waned and Chinese consumers continued to watch their wallets closely.
Factory output, a growth pillar in China’s pandemic recovery for more than a year, remained resilient last month, but investment and domestic consumption fell short of expectations despite a downturn. inch after a long vacation, weighed down by a new wave of Covid-19 infections.
China’s industrial production rose 8.8 percent from a year earlier in May, slowing from April’s 9.8 percent pace, data from the National Bureau of Statistics showed Wednesday. The reading of factory output, which was supported by strong foreign demand for products made in China, matched the median forecast made by economists polled by the Wall Street Journal.
The key indicator of factory activity was 13.6% above the level recorded in May 2019, long before the Chinese economy was hit by the novel coronavirus, the statistics office said. Officials compared monthly economic data with the same period two years earlier to filter out distortions from last year’s pandemic shock.
The double-digit percentage growth from pre-virus levels is far greater than the roughly 6% year-over-year expansion that China’s industrial sector was seeing each month before the pandemic, underscoring the strength of the current rebound in the Chinese industrial sector.
But while Chinese factories have continued to exceed expectations, its consumers have always disappointed policymakers, who hoped for a pivot to domestic spending as the main engine of the economy.
Retail sales, a key indicator of Chinese consumption, rose 12.4% last month from a year earlier, slowing from the annual growth rate of 17.7% in April and below gain of 13.6% expected by economists.
Unlike the U.S. Pandemic Stimulus Program, which paid money directly into household bank accounts, Beijing’s response boosted investment and helped businesses affected by Covid-19.
“The direction of Chinese consumption will improve further, but the pace of its recovery will be slow,” said Hui Shan, chief economist for China at Goldman Sachs. Ms. Shan said that even more than a year after the initial outbreak, Chinese consumers’ propensity to save rather than spend remains high.
This cautious trend has delayed domestic spending in China’s economic recovery, which has instead been fueled primarily by industrial production, exports, and government-backed investment.
The hoped-for recovery in consumer spending did not materialize despite further signs of improvement in China’s labor market last month. The main measure of unemployment in the country, the polled urban unemployment rate, fell for a third consecutive month, to 5.0% in May, its lowest level in two years.
Bo Zhuang, Chinese economist for London-based economic research firm TS Lombard, blamed the lackluster spending figures on slow wage growth, a relatively slow vaccination campaign, and long-term behavioral changes induced by the pandemic.
“Catching up with Chinese consumption will take longer than the market anticipated,” Zhuang said.
Fu Linghui, spokesperson for China’s bureau of statistics, acknowledged the unbalanced nature of the recovery, pointing to a global economic rebound on Wednesday that was itself unbalanced and faced with rising global commodity prices.
Ahead of Wednesday’s data release, some economists expected Chinese consumption to show signs of accelerating, following encouraging figures from the five Labor Day holidays that ended on May 5.
More recent data suggests that with new infections breaking out across the country prompting authorities to take localized lockdown measures, consumer spending may remain subdued for some time.
In the three-day dragon boat festival that ended on Monday, Chinese travelers made 89.1 million trips, according to official figures, roughly in line with levels before the 2019 pandemic. But tourism revenues totaled $ 4.6 billion (29.4 billion yuan), or about 25 percent. lower than for the same period in 2019.
Economists have criticized the tightening of social distancing rules for deterring long-distance travel and limiting spending. Others said the reduction in volumes at major seaports in Guangdong province, which accounts for about a quarter of Chinese exports and a tenth of the country’s economic output, could blunt a crucial engine of China’s entire economy. by raising the prices of industrial products.
Meanwhile, Chinese infrastructure investments, which are largely funded by local governments, slowed last month as localities slowed the issuance of bonds used to fund such projects.
Infrastructure investment in May turned negative for the first time since the pandemic, according to a calculation by Zhiwei Zhang, a Shenzhen-based economist at Pinpoint Asset Management.
The drop weighed on China’s capital investment figures, which rose 15.4% between January and May from a year earlier. This is lower than the 19.9% growth rate recorded in the first four months of the year and the 16.6% figure expected by economists.
Ms Shan, the Goldman Sachs economist, predicted that local government bond issuance, which in May was less than 20% of this year’s annual quota, will accelerate in the coming months, providing further support to growth.
However, she warned that the increasingly unbalanced nature of China’s recovery along with concerns about a housing bubble would likely prevent central bankers from easing monetary policy, even as many smaller service-sector companies continue to struggle. .
—Grace Zhu and Bingyan Wang contributed to this article.
Economy of China
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