Industrial production in China increased by 3.5% in May compared to the same month in 2022, according to a report by the National Bureau of Statistics on Thursday. In the first five months of the year, the industrial output was 3.6% higher than the same period in 2022. The supply of electricity, thermal power, gas and water grew by 4.8% year-on-year, manufacturing went up by 4.1%, while mining lost 1.2%. In terms of products, the output of solar cells, new-energy vehicles and service robots rose by 53.1%, 43.6% and 34.3% respectively from May 2022.
Retail sales in China surge by 12.7% in May
Retail trade in China was up by 12.7% in May on a yearly basis, the National Bureau of Statistics said in its latest release on Thursday. Year-to-date, retail sales increased by 9.3%. The retail sales of goods grew 10.5% annually, while catering jumped 35.1%. Online retail sales rose by 11.8% and represented 25.6% of the total retail sales of consumer goods.
China’s Central Bank Ramps Up Rate Cuts as Economy Weakens
China’s central bank ramped up its monetary stimulus to help spur the economy amid signs of a weakening property market, a slump in business investment and record joblessness among young people. The People’s Bank of China lowered the rate on its one-year loans — or medium-term lending facility — by 10 basis points to 2.65%, the first reduction since August. That’s likely to prompt banks to lower their lending rates next week. The widely anticipated move came shortly before official data showed economic activity weakened in May. Growth in industrial output slowed to 3.5% from 5.6% in April, while retail sales grew 12.7%, below expectations. Fixed asset investment by private businesses contracted in the first five months of the year, while property investment deteriorated further. With evidence mounting of a downturn, Beijing is now shifting its stance to provide more stimulus to the economy. Economists expect the PBOC to cut interest rates further this year and give banks a cash boost so they can keep lending. The State Council is also expected to discuss a broad package of stimulus proposals, Bloomberg News reported earlier this week, with specific support geared toward the ailing real estate industry. Beijing is still on track to meets its growth target of around 5% for this year. Other measures are likely to follow, including “targeted support to the housing sector, increase in policy bank lending, and possibly additional local special bond issuance quota.”
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The National Bureau of Statistics said the foundation of the economy’s recovery “is not yet solid,” and focus needs to be on repairing and expanding demand. The unemployment rate remained relatively elevated at 5.2% in May, while the jobless rate for young people between the ages of 16 and 24 rose slightly to 20.8%, a new record high since data became available in 2018. The PBOC timed its easing just as the Federal Reserve paused its rate-hiking cycle for the first time in 15 months, while still signaling further tightening ahead. The widening gap between US and Chinese rates have fueled capital outflows and put pressure on yuan, which is down more than 3% against the dollar this year.
The PBOC also provided 237 billion yuan ($33 billion) of medium-term loans, more than the 200 billion yuan maturing in June. The cut to the one-year MLF rate was largely expected after a key short-term rate was reduced by the same magnitude on Tuesday. The two rates are usually adjusted together.
The signal from the PBOC “is very important because it’s a reversal of policy direction,” Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management, said in an interview on Bloomberg TV. “Now policymakers have to press the gas pedal a lot harder. In the near term, we need continuous monetary and fiscal support.”
The State Council could discuss the stimulus measures as soon as Friday, according to people familiar with the discussions, although it’s unclear when the measures will be announced or implemented. The Economic Daily also said in a front-page commentary on Thursday that China needs to take further steps to support the economy, including maintaining strong fiscal spending. “The biggest question is the general sentiment — households are saving more and corporations are not investing as much, because they are not certain about the future,” said Gary Ng, senior economist at Natixis SA. “Even if the central bank adopts more lax monetary policy now, it may not be too successful, because it ultimately depends on the general sentiments.” NN: What bullshit!! China’s massive economy is awakening. An it is transiting from a manufacturing to a service economy. And it is consuming records amounts oil oil…. No matter how the AI story tellers want to spin a China slow down……. Its a China speed up.