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China Economic Activity May 2024

China: May real-sector data largely disappoints

Industrial production grew 5.6% year on year in May (April: +6.7% yoy), undershooting market expectations. The slowdown largely reflected decelerating manufacturing and energy production. Fixed-asset investment rose at a more moderate pace of 4.0% in January– May (January–April: +4.2%), the worst result since December 2023 and also below market expectations. Investment was state-dominated, with private investment largely stagnant year to date. In addition, housing indicators such as home prices, housing sales, floor space under construction and housing investment remained deep in the red.

On the flipside, retail sales growth sped up to 3.7% in May from 2.3% in April, overshooting market expectations. Retail sales were likely supported by shopping festivals and a long holiday in early May.

Commenting on industrial production, EIU analysts said:

“The strong growth in industrial output showed that China’s manufacturing activity is benefiting from the recovery in global demand, largely from the Association of South-East Asian Nations (ASEAN) and Latin America. Output growth in the export-oriented computer, communications and electronics sector stayed at a relatively high level (14.5%). Meanwhile, riding on the rise of tourism and normalisation of global connectivity, output in transport equipment (including railways, ships and planes) also achieved strong growth (11.8%).”

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