Connect with us

Hi, what are you looking for?

News

China’s factories perk up, but frail consumption points to weak economic recovery

REUTERS

BEIJING – China’s economy showed signs of recovery in May after slumping in the prior month as industrial production rose unexpectedly, but consumption was still weak and underlined the challenge for policymakers amid the persistent drag from strict COVID curbs.

The data, however, provides a path to revitalise growth in the world’s second-biggest economy after businesses and consumers were hit hard due to full or partial lockdowns in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai.

Industrial output grew 0.7% in May from a year earlier, after falling 2.9% in April, data from the National Bureau of Statistics (NBS) showed on Wednesday. That compared with a 0.7% drop expected by analysts in a Reuters poll.

The uptick in the industrial sector was underpinned by the easing of COVID curbs and strong global demand. China’s exports grew at a double-digit pace in May, shattering expectations, as factories restarted and logistics snags eased.Read full story

The mining sector led the way with annual output up 7.0% in May, while that in the manufacturing industry eked out a meagre 0.1% growth, mostly driven by the production of new energy vehicles which surged 108.3% year-on-year.

“Activity data paints an economic recovery picture in May, but only a slow one,” said Iris Pang, Chief China economist at ING.

“The government is likely to respond to this economic weakness by delivering more fiscal stimulus,” Pang said.

Chinese shares rose after the data were released, with mainland China’s bluechips .CSI300 up 1.8% and Hong Kong shares .HSI 1.4% higher, in contrast with a largely subdued session for most other Asian share markets. Read full story

Fu Linghui, a spokesman at NBS, told a press conference that he expects the recovery to improve further in June due to policy support.

However, “the international environment is still complex and severe,” he said, highlighting the risks to the outlook.

“Our domestic recovery is still at its initial stage with the growth of key indicators at low levels,” Fu said.

WEAK CONSUMPTION, EMPLOYMENT CONCERNS

That caution was underscored in consumption data, which remained weak as shoppers were confined to their homes in Shanghai and other cities. Retail sales slipped another 6.7% in May from a year earlier, on top of a 11.1% contraction the previous month.

They were slightly better than the forecast of a 7.1% fall due to the increased spending on basic goods such as grains, edible oils and food and beverages. Read full story

“We should not be overly optimistic about consumption as the recovery has been quite slow. Affected by repeated COVID outbreaks, slower income growth, a cautious view of the future expectations, there will not be a revenge spending, as people have expected,” said Wang Jun, chief economist at Zhongyuan Bank.

Sales in the catering industry, a sector highly sensitive to COVID curbs, contracted by 21.1% in May, compared with a fall of 22.7% in April.

Fixed asset investment, a growth driver that policymakers have hoped would prop up the economy, rose 6.2% in the first five months, beating an expected 6.0% rise but slowed from a 6.8% gain in the first four months.

China’s property sales fell at a slower pace in May, suggesting improved buyer sentiment after a slew of easing policy steps taken by cities across the country to boost demand. The data sent shares of Chinese developers soaring. Read full story

Employment remained a big concern, however. The nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

The central bank on Wednesday kept medium-term policy rate unchanged for a fifth straight month, matching market expectations. Read full story

China’s cabinet recently announced a broad package of economic support measures, although analysts say the official GDP target of around 5.5% for this year will be hard to achieve without doing away with the zero-COVID strategy. Read full story

FRESH LOCKDOWN FEARS LOOM

Fears of fresh lockdowns also loom large under the stringent COVID policy. Authorities in Beijing warned on Tuesday that the city of 22 million was in a “race against time” to get to grips with its most serious outbreak since the pandemic began, as cases tied to a 24-hour bar grew. Read full story

Shanghai is still grappling with lingering COVID cases after it emerged from a two-months long lockdown.

Any further lockdowns and supply chain disruption risks amid future COVID outbreaks may constrain the rebound of the economy, analysts say.

“The short-term trend of recovery in June is becoming obvious, but the economy is still some distance away from normal operations,” said Wang from Zhongyuan Bank. – Reuters

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

THE peso sank to the P55-a-dollar level on Wednesday — its weakest in more than 16 years — amid fears of a recession in...

News

(MAY 13, 2020) Houses are dwarfed by towering buildings of the Makati City skyline on a quiet Wednesday midnight as they government through the...

News

THE Philippine Ports Authority (PPA) has awarded more port projects, including the construction of a cruise ship port in Coron, Palawan province southwest of...

News

MORE Filipinos opened their own bank accounts at the end of last year, as many of them were forced to pay for services online...

News

Sebastian Ganso / Pixabay A unit of Manila Electric Co. (Meralco) has partnered with a Korean company for a research and development project in...

News

Koala Cruz / BW file photo Boulevard Holdings, Inc. (BHI) is tearing down the rooms in Fridays Boracay and renovating the resort to upgrade...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Financial Advisors

The healthcare ecosystem is one that has thrived on the cusp of scientific progress, benefitting enormously from the winds of change in the technological...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.