China’s industrial output continues slow recovery from virus hit

BEIJING (AFP) – China’s factory output rose again in May, while official data yesterday also showed retail sales improved further after collapsing at the start of the year but officials warned the country faced a rocky recovery as it emerges from the coronavirus crisis.

The world’s number two economy has been hammered by the disease, with strict lockdown measures to contain it causing the first recession in decades during January-March.

Industrial production expanded 4.4 per cent last month, the Bureau for National Statistics (NBS) said, up from 3.9 per cent in April, which was the first increase this year.

The reading was slightly short of the five per cent forecast in a Bloomberg survey but is a sharp improvement on the 13.5 per cent collapse in the first two months of the year.

Retail sales remained in negative territory, shrinking 2.8 per cent in May, and while it was also worse than the expected two per cent estimated, it was much better than the 7.5 per cent contraction suffered in April.

An employee works at a textile machine factory in Lianyungang in China’s eastern Jiangsu province. PHOTO: AFP

Consumer spending is increasingly crucial for the Chinese economy as leaders look to transition it from one driven by investment and exports, and has taken on more importance with overseas markets battered by the virus.

But sluggish spending indicates people are still anxious about returning to their normal lives.

Deputy Director of the Industry Department at the NBS Jiang Yuan noted yesterday that the recovery of some industries and products weakened in May, adding that “the external environment is complex, and the stable operation of the industrial economy still faces many difficulties and uncertainties”.

China’s property market saw improvement, with new home sales jumping 9.7 per cent on year in May owing to pent-up demand.

But fixed-asset investments shrunk 6.3 per cent on-year in January-May – slightly more than the six per cent forecast – having plunged 10.3 per cent in the first four months.

During past downturns, Beijing has banked on higher infrastructure spending to lead a recovery, and cement and steel mills have already cranked up furnaces to more than 92 per cent of capacity.

Unemployment – which has climbed this year – shrank slightly to 5.9 per cent, from six per cent in April.

China economist at Capital Economics Martin Rasmussen warned that “the bulk of job losses from COVID-19 were among migrant workers, who are not properly accounted for in the survey”.

However, he said there are “signs elsewhere that migrant job growth picked up in May, especially in the construction sector”.

Even so, analysts warned that there is still a lot of uncertainty among China’s spenders.

“The retail sales could be a one-off improvement from the May Golden Week long holiday,” said ING chief economist for Greater China Iris Pang.

She warned that the “unstable job market and healthcare concerns are the main factors slowing down the recovery…(and) people were still spending carefully”.

The Communist Party has long staked its legitimacy on delivering jobs and prosperity in return for public acquiescence to its political monopoly.

A fresh outbreak of the coronavirus in Beijing has raised concerns about a new wave of infections that could hurt any economic recovery.

China’s economy shrank 6.8 per cent in the first quarter.