China’s economy resumed its grind towards slower growth in April, weighed by overcapacity industries such as steel and coal.
Industrial production climbed 6% in April from a year earlier, down from 6.8% in March and missing economists’ estimates for 6.5%. Retail sales also missed analyst forecasts, rising 10.1%, while fixed-asset investment increased 10.5% in the January-April period versus economists’ expectation for 11%.
After a rocky start to 2016 marked by a sliding yuan, capital outflows and tumbling shares, China’s economy had stabilised and even picked up since March, led by a surge in new credit and rebound in the housing market. A pullback in lending and Saturday’s tepid readings dash hopes the economy had turned a corner. Top leaders this week signalled a shift away from debt- and stimulus-fueled growth, stressing the need for deleveraging, upgrading industrial capabilities and cutting excess capacity.
"All the engines suddenly lost momentum," said Zhou Hao, an economist at Commerzbank AG in Singapore. "The policy tightening will be only a short-term phenomenon."
The slower industrial output was due to weak external demand, a sharp drop in mining, high energy-consumption and overcapacity sectors including steel and coal, as well as seasonal effects, the National Bureau of Statistics said in a statement released after the data. It pointed out that the output of the steel and coal industries both fell from a year earlier.
Retail sales were weighed by a pullback in automobile sales, which increased 5.1% from a year earlier versus a 12.3% jump in March, the NBS said.
Slowest pace
Private investment in fixed assets decelerated to the slowest pace since at least 2012.
"Due to weak market demand, companies’ reluctance to invest and market entrance barriers, China’s private fixed-asset investment has been decelerating since the start of this year," the statistics bureau said in a statement. "This will hurt the steady growth of investment and it deserves a lot of attention."
Data Friday showed China’s broadest measure of new credit rose less than expected last month. Aggregate financing was 751 billion yuan ($115 billion) in April, the People’s Bank of China said, below all 26 analyst forecasts in a Bloomberg survey. New yuan loans were 555.6 billion yuan, compared with the median estimate for 800 billion yuan.
China’s central bank sought to reassure investors that monetary policy will continue to support the economy after the sharp slowdown in new credit. The deceleration was mainly due to a pick-up in a programme to swap high-cost local government debt for cheaper municipal bonds, with no less than 350 billion yuan of such swaps conducted last month, while aggregating financing growth was affected partly by a decrease in corporate bond issuance, according to the central bank.
China’s monetary policy remains prudent and policy moves must support economic growth while fully considering the impact on future prices and the need to prevent financial risks, People’s Bank of China research bureau chief economist Ma Jun said in an e-mailed statement from the bank.
"The recovery appears to be fragile," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong. "The reduction in loan extension in April as well as housing tightening policy may be having some negative impact already."