China’s economic data misses expectations as economy continues to show uneven recovery

FAN Editor

YANGZHOU, CHINA – MAY 02: Aerial view of tourists visiting the Dongguan street during the May Day holiday on May 2, 2023.

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China’s economic data for April broadly missed expectations as the economy continued to show an uneven path of recovery from the impact of its stringent Covid restrictions.

Industrial production for April rose by 5.6% year-on-year, compared to the 10.9% expected by economists surveyed in a Reuters poll. The figure was up 3.9% in March following a muted start to the year.

Retail sales rose by 18.4% – lower than economists’ forecast a surge of 21%.

Fixed asset investment rose by 4.7%, against expectations of 5.5%. The reading rose 5.1% the previous month.

“China is in the stage of recovering, compared to last year, the numbers are positive as we just saw, but is the recovery good enough for the market, is the recovery good enough to meet investors’ expectations – that’s the big question here,” BofA Securities China equity strategist Winnie Wu told CNBC’s “Street Signs Asia.”

China's post-Covid economic recovery has been losing speed since April, economist says

“It’s not good enough to meet with investors’ expectations – that’s a problem,” Wu said, adding that the momentum from China’s pent-up demand seems to be fading away.

“The recovery of income, of job security, and confidence will take time,” she said.

China stocks have pared most of the gains seen this year. The Shenzhen Component was down 4.67% quarter-to-date and up only 1.48% year-to-date, and notching a 9.5% drop from its peak in early February.

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“Market sentiment remains very weak in our client conversations,” Goldman Sachs economist Hui Shan wrote in a Sunday report.

She expects more measures from the government rather than a change in interest rates to improve market confidence.

“Symbolic measures that aim at boosting confidence, such as RRR cuts, seem more likely to us, especially around quarter-end when liquidity demand is high,” she wrote, referring to banks’ reserve requirement ratio — the amount of funds banks need to hold as reserves.

Record-high youth unemployment

The latest data included a 20.4% youth jobless rate, the unemployment rate between ages 16 and 24. The reading in April marked a record high.

“Many people, investors see this as a leading indicator. If the younger people are unable to get jobs, don’t have the income security, where is the confidence, where is the consumption recovery coming from?” said Wu.

She said the question of confidence is resonated in weakened markets sentiment as well as other high-frequency data, including new home sales.

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