China’s economic activity didn’t go backwards as it did in Covid-hit April, neither did it soar, it was more a case of a not very convincing middle ground.
Investment was a bit weaker than forecast, production data was better, while retail sales were down again, but not by as much as expected by analysts.
The National Australia bank said in a commentary on the month’s data that the continuing outbreaks (small as they are) of Covid raise “concerns at the time of writing that some restrictions may be re-imposed following another increase in COVID-19 case numbers.”
“This serves to highlight the ongoing uncertainty around China’s economic outlook, given the continuation of zero-COVID public health policies” the NAB commented.
China’s retail sales were a touch stronger than forecast, but still shrank for a third month in a row as the Covid lockdowns continued to cut demand especially in parts of Shanghai, Beijing and other parts of the country where the virus outbreaks continue.
China’s National Bureau of Statistics (NBS) said retail sales shrank by an annual 6.7% in May, compared with market expectations for a 7.1% fall and better than the 11.1% drop in April which had been the biggest fall since March 2020.
For the first five months of the year, retail sales in China were down 1.5% from the first five months of 2021.
The NBS said industrial production unexpectedly grew by an annual 0.7% in May, topping consensus for a 0.7% drop and reversing from a 2.9% fall in April.
For the first five months of the year, industrial output grew a weak 3.3%.
Fixed asset investment in China slowed to a 6.2% annual rate in May from 6.8% in April. Investment in property fell 4% in the five months to May, after the 2.7% drop in the first four months of the year.
The unemployment rate in China’s 31 largest cities topped 2020 highs to reach 6.9% in May — the highest on record going back to 2018. That rate rose from 6.7% in April. But the overall unemployment rate in cities ticked lower to 5.9%.
The unemployment rate for young people aged 16 to 24 rose further to 18.4% in May, up from 18.2% in April.
The NBS said in a statement that the economy “showed a good momentum of recovery” in May, “with negative effects from Covid-19 pandemic gradually overcome and major indicators improved marginally.”
“However, we must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery,” the bureau said.
China trade data told a similar story – surprisingly solid exports which rose 16.9% and a 4.1% rise in imports – that was a touch better than expected but reflected higher prices and no real increase in volumes that would have followed higher domestic demand for key commodities.
Economists say Chinese economic activity – especially retail sales and production will have to rebound sharply in June if the country is to avoid either a quarter of contraction, or flat to weak growth after the annual 4.8% rise in GDP in the first quarter.