(Bloomberg) -- China’s economy continued to recover in May, with accelerating industrial output growth leading the way while consumption remains in contraction.
- Industrial output rose 4.4% from a year earlier, versus a median estimate of a 5.0% expansion. Retail sales fell 2.8%, compared to a projected 2.3% drop. Fixed-asset investment declined 6.3% in the first five months, versus a forecast 6% drop.
- The surveyed urban jobless rate fell to 5.9% from 6% the previous month.
Key Insights
- The data signal that China’s economy continued to inch out of the virus-induced slump, supported by continued policy stimulus that’s driving credit growth
- While industrial production has rebounded from a contraction in February, private consumption is still shrinking and investment hasn’t rebounded.
- However, with the rest of the world in recession, exports dropping and China’s relations with the U.S. continuing to worsen, a rebound relies to a large extent on domestic consumption.
- The slowdown due to the outbreak has thrown millions out of work and hit income. So far, government stimulus measures have focused on demand-side policies such as infrastructure investment and lowering the cost of company borrowing, which may only have a limited effect on households in the short-term.
- “China’s growth momentum is set to recover further in the coming months, as economic activities normalize,” Wang Tao, UBS Group AG’s chief China economist, wrote in a report before the data release. However, “cautious consumer sentiment, ongoing global downturn, and decoupling pressures will bring downward pressures,” she wrote.
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