Resilience Despite Tariff Pressure: China’s factory output growth slowed down to 6.1% year-over-year in April, but still managed to beat expectations of a 5.5% rise. This resilience can be attributed to government support measures, such as stronger fiscal spending, which may have cushioned the impact of the trade war with the US. According to Tianchen Xu, senior economist at the Economist Intelligence Unit, “April’s resilience is in part a result of ‘frontloaded’ fiscal support.
Key Highlights:
– Industrial Output: China’s industrial output grew 6.1% from a year earlier, down from 7.7% in March. Despite the slowdown, the figure exceeded analysts’ expectations.
– Exports: Exports were stronger than expected earlier in the month, supported by exporters rerouting shipments and countries buying more materials from China amid a re-ordering of global trade due to US tariffs.
– Trade Agreement: Beijing and Washington reached a surprise agreement to roll back most tariffs imposed on each other’s goods since early April. The 90-day pause has put the brakes on a trade war that has disrupted global supply chains and stoked recession fears.
However, economists warn that the short-term truce and US President Donald Trump’s unpredictable approach will continue to cast a shadow over China’s export-driven economy, which still faces 30% tariffs on top of existing duties. Fu Linghui, statistics bureau spokesperson, noted that China’s foreign trade has overcome difficulties and maintained steady growth, demonstrating strong resilience and international competitiveness.
Retail Sales and Consumption:
Still on Resilience Despite Tariff Pressure
– Retail Sales Growth: Retail sales rose 5.1% in April, down from a 5.9% increase in March, and missed forecasts for a 5.5% expansion. Economists attributed the slowdown to the impact of US tariffs on consumer expectations and tepid demand at home.
– Commodity Sectors: Commodity sectors showed signs of weakness, with the country’s daily crude oil processing rate down 4.9% in April from March, while crude steel output slid 7% month-on-month.
– Home Appliance Sales: The government’s push to boost household spending via a trade-in scheme for consumer goods led to a 38.8% gain in home appliance sales.
Economic Indicators:
– Unemployment Rate: The unemployment rate fell to 5.1% from 5.2% in March.
– Economic Growth: China’s economy expanded 5.4% in the first quarter, exceeding expectations. Authorities remain confident of achieving Beijing’s growth target of around 5% this year.
– Stimulus Measures: Authorities announced a package of stimulus measures, including interest rate cuts and a major liquidity injection, to foster a sustainable recovery.
Expert Opinions:
– Goldman Sachs Economists: We caution that the near-term growth strength is at the cost of payback effects later and believe more policy easing is necessary to stabilise growth, employment and market sentiment.
– Julian Evans-Pritchard: The US-China ‘deal’ agreed at the start of last week will provide some relief, but even if the tariff rollback proves durable, wider headwinds mean that we still expect China’s economy to slow further over the coming quarters
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