Chinese Economy Continues to Run Hot and Cold

By Glenn Dyer | More Articles by Glenn Dyer

China’s final drop of economic data for May was, as we have seen for the past couple of months, mixed and less buoyant than forecast.

Outbreaks of COVID-19 in the Pearl River Delta since late May may have impacted some areas – it certainly crimped exports as they brought some key ports to a standstill.

And plunging pork prices have disrupted prices – forcing farmers and producers to kill more animals than they have to to try and save money and limit losses.

That is helping push down retail price inflation and possibly impacting overall sales, which could explain the weaker growth rate for retail sales last month.

Retail sales rose 12.4% year-on-year in May, weaker than 13.6% growth expected by analysts and down from April’s 17.7% jump seen in April.

Fixed asset investment rose 15.4% in the first five months from the same period a year earlier, against a forecast 16.9% rise.

That was also slower than January-April’s 19.9% increase.

In all cases the weak comparative base from the same periods in 2020 when the country was lockdown or in recession, has again impacted the comparisons of 2021 performance.

But economists say there is an unevenness that is persisting in performance – it is clear that while manufacturing is battling bottlenecks and rising commodity prices (and higher general costs), the service sector seems to be a bit more stable.

Surging commodities prices pushed China’s producer inflation to its highest level in over 12 years, squeezing profit margins for mid- and downstream firms.

Bank lending unexpectedly rose in May but broader credit growth continued to slow, a trend analysts said could start to weigh on activity in the second half of the year.

Wednesday’s data release revealed a slowing in real estate investment in May, as more smaller towns joined bigger cities in trying to cool a hot housing market.

Real estate investment in May rose 9.8% from a year earlier, down from 13.7% seen in April.

Data from the National Bureau of Statistics on Wednesday showed that for the January-May, property investment grew 18.3% from the same period last year, slower than a 21.6% increase in January-April.

Property sales by floor area rose 9.2% in May from a year earlier, slower than 19.2% growth in April, according to Reuters.

New construction starts, measured by floor area, fell 6.1% in May, better than the 9.3% fall in April.

Car sales fell 3.1% in May but sales of New Energy Vehicles again surged and are running a record annual rate of close to 2.6 million units a year.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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