China consumption slows as retail sales and investment data disappoint

Industrial production rose by 6.7% in April from a year ago, beating expectations for 5.5% growth. That was also a marked pickup from 4.5% in March.

But fixed asset investment rose by 4.2% for the first four months of the year, lower than the 4.6% expected increase.

Real estate investment steepened its pace of decline, and was down 9.8% year-on-year for the first four months of 2024.

Infrastructure and manufacturing investment during that time both slowed their pace slightly from the level reported as of March.

The urban unemployment rate in April was 5%. The bureau has previously said it would publish the breakdown by age in the days following the overall data release.

Retail sales grew by 6.8% year-on-year during a recent holiday period from April 29 to May 3, according to China’s Ministry of Commerce.

The ministry said retail sales of home appliances rose by 7.9% during that time, while that of automobiles climbed by 4.8%, boosted by nationwide trade-in incentives.

“Major indicators of industry, exports, employment and prices improved overall, with new driving forces maintain[ing] rapid growth,” the bureau said.

Some consumers who are uncertain about their future income and other aspects will remain cautious about spending, said Bruce Pang at JLL.

But he noted that improving employment data and growth in services consumption indicated retail sales could improve down the road.

The statistics bureau said in a statement that the April figures were affected by the May 1 Labor Day holiday and last year’s high base. 

A spokeswoman for the bureau, Liu Aihua, pointed out that last year, the multi-day May 1 Labor Day holiday had included two days in April. This year, the holiday didn’t begin until May 1.

She said the real estate sector remains in a period of adjustment.

China was also scheduled Friday to kick off a six-month program for issuing decades-long bonds to fund strategic projects. Oxford Economics expects the bulk of any economic impact won’t be felt until the first half of next year.

Liu noted the issuance of ultra-long bonds could also help boost market confidence.

Other data released for April have pointed to a mixed picture for growth.

Exports grew year-on-year in April, up by 1.5% and in line with expectations, while imports grew far more than expected, up by 8.4%.

In another indication of stabilizing domestic demand, consumer prices ticked up last month.

But a measure of prices at the factory level continued to decline. New loan data for April slumped to levels not seen in at least two decades, due largely to changes in data measurement but also reflecting sluggish demand from businesses and households in borrowing for the future.

A prolonged slump in the real estate sector has yet to show signs of significant turnaround, with many pre-sold apartments still under construction. More cities have eased housing purchase restrictions in the last few weeks in a bid to bolster sales.

Officials from the housing ministry, central bank and financial regulator are scheduled Friday afternoon to hold a press conference about policies to support the delivery of homes.

Dan Wang, chief economist at Hang Seng Bank (China), said in an interview late last month she expected China’s property market to stabilize by the end of next year.

“It actually looks to me the policy succeeded, in a very brutal way because it’s happening too fast, because it’s essentially stopped speculation,” she said.

While the real estate slump has weighed in particular on middle-class wealth, she pointed out the economy overall has held up.

“Data quality aside, it seems like the economy is able to compensate for a big loss in the housing market by industrial investment and manufacturing,” Wang said. “It has showed some strength in the way the Chinese economy is organized and how its industrial policy has been done.”

China’s official GDP grew by 5.3% in the first quarter versus a year ago, better than expectations for a 4.6% increase. The country has set a target of around 5% GDP growth for 2024.

The EU Chamber of Commerce in China told reporters last week that recent economic pressures appear cyclical, and that it’s more important for foreign businesses to see an increase in domestic demand rather than industrial investment.

Retail sales grew by 6.8% year-on-year during a recent holiday period from April 29 to May 3, according to China’s Ministry of Commerce.

The ministry said retail sales of home appliances rose by 7.9% during that time, while that of automobiles climbed by 4.8%, boosted by nationwide trade-in incentives.