China's retail growth falls to 16 years, as trade war risk rises

BEIJING (Reuters) – China reported surprisingly weaker growth in retail and industrial production for April Wednesday, putting pressure on Beijing to roll out more stimulus as the US trade war escalates.

Clothing sales fell for the first time since 2009, suggesting that Chinese consumers grew more concerned about the economy even before a US tariff increase on Friday increased the stress on the country's struggling exporters.

Total retail sales in April increased by 7.2% from the previous year, the slow pace since May 2003, data from the National Bureau of Statistics (NBS) shows. The March deficit is 8.7% and forecasts of 8.6%.

The data suggested consumers now began to cut out on everyday products such as personal care and cosmetics, while continuing to waste more expensive items such as cars.

"Weak retail trade is partly due to a decrease in employment and reduced income in the middle and low income groups," Wen, economist at Hwabao Trust said.

"With regard to future policies to keep consumption as a stabilizing economy, China may roll out targeted cuts or subsidies to medium and low income groups."

As a whole, Chinese data for April was largely pointed to the loss of momentum, after surprisingly optimistic March readings had raised the economy slowly returning on a firmer basis and would require less political support.

Growth in industrial output fell more than expected to 5.4% in April this year, and withdraws from a 4-1 / 2-year high of 8.5% in March, which some analysts suspected had increased with seasonal and temporary factors.

Analysts asked by Reuters had the forecast that production would increase by 6.5%.

The production of motor vehicles dropped nearly 16% as demand weakened, with declines of 18.8%, the steepest decline since September 2015. Industrial data this week showed that car sales fell 14.6% in April, the tenth consecutive month with decline.

China's exports also fluctuated unexpectedly in April in light of US tariffs and weaker global demand, while new factory orders from home and abroad were weak.

"There are still uncertainties that are spreading the economy's performance. Tensions between China and the US have returned while concerns about insufficient demand the world over are increasing," says No. 19659004] Not to say that China may need a more comprehensive cut in banks' reserve requirements in June before a G20 summit where presidents Donald Trump and Xi Jinping are expected to discuss trade.

"The financial gap in the market is relatively large," does not say, adding that smaller, more targeted reductions in bank reserves longer may be enough to stimulate stronger growth.

There is relatively room for growth support policy, Liu Aihua, a spokeswoman at the statistical office, told journalists at a briefing, adding that employment is expected to remain stable.

The April nationwide survey-based unemployment rate improved to 5.0% from 5.2% in March, although analysts are generally skeptical about China. employment data and see an increase in redundancies if export conditions deteriorate.

INVESTMENT

By adding concerns about domestic demand, Wednesday's data also showed an unexpected impact on investment.

Investment growth in real estate was reduced to 6.1% in the first four months of this year, and the expectation of a slight increase to 6.4%.

The growth in infrastructure expenditure remained stable at 4.4%, with a sharp decline in cement production, possibly reflecting a slower than expected dividend from Beijing's work to track road and rail projects.

China is trying to construct a construction boom, although it is increasing efforts to ease stress on smaller companies, ranging from tax cuts to financial incentives for non-casting firms.

Investment in real estate fell sharply to 5.5% growth from 6.4%, suggesting that the sector is still facing difficulties. The private sector accounts for most jobs in China and about 60% of total investment.

One of the few bright spots in the data was real estate investment, an important growth driver.

Real estate investments in April rose 12% from the previous year, unchanged from March, according to Reuters estimates. But the demand for new homes remains weak, deviated from the sale of appliances and furniture.

TRADE TENSIONS

Washington dramatically increased its 10-month tariff war with Beijing on Friday by raising $ 200 billion of Chinese goods in the midst of trade negotiations, and Trump has threatened new charges on all remaining Chinese imports, sends global financial markets to a tailspin.

China repaid on Monday, but on a smaller scale.

The two pages seem to be locked in negotiations. But Trump softened his tone on Tuesday, insisting that conversations between the world's two largest economies had not collapsed.

Economists that Citi estimates that US tariff increase can provide 50 basis points of China's GDP growth, reduce exports by 2.7% and cost the country another 2.1 million jobs, although optimistic, a trading context will eventually be reached.

Analysts at BofA Merrill Lynch believes a longer period of brinkmanship will pull China's growth to 6.1% this year, from a near 30-year low of 6.6% in 2018.

They expect more political easing short term, further cuts in banks' reserve requirements and an increase in bank lending, as well as consumer support to increase sales of products such as cars, appliances and smartphones.

Some companies like BMW have already lowered their prices after China has cut VAT on April 1.

"We have full confidence in China's economic prospects," said Geng Shuang, spokesman for the Chinese foreign ministry, said at a daily news meeting.

"U.S .. protectionist and bullying actions will have some influence on the Chinese economy, but they can be completely overcome. Of course, if someone is not willing to do business with China, others will fill that gap. "