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




  • Reuters economists expected China’s industrial production to jump 10.9% in April and retail sales to rise 21%.
  • Chinese shares have parched most of the gains seen this year, with the Shenzhen component down 9.5% from its peak in early February.

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

Vcg | Visual China Group | Getty Images

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

Industrial production for April rose 5.6% year-on-year, compared with the 10.9% expected by economists polled by Reuters. The figure was up 3.9% in March after a subdued start to the year.

Retail sales rose by 18.4% – lower than the economists’ forecast, an increase of 21%.

Construction investment rose by 4.7%, against expectations of 5.5%. The gauge rose 5.1% last month.

“China is in the stage of recovery, 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.”

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

“Restoring income, job security and confidence will take time,” she said.

Read more about China from CNBC Pro

“Market sentiment remains very weak in our client calls,” 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 aimed 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 ratios – the amount of funds banks need to hold as reserves .

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

“Many investors see this as a leading indicator. If the younger people are unable to get a job, do not have income security, where is the confidence, where is the upswing in consumption coming from?” Wu said.

She said the issue of confidence is echoed in weakened market sentiment as well as other high-frequency data, including new home sales.



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