Domestic real-sector data is mixed in April

Latest reading: Industrial output expanded 6.1% in year-on-year terms in April, below March’s 7.7% reading but overshooting market expectations. Manufacturing and mining output drove the expansion. In contrast, retail sales and fixed-asset investment were weaker than market expectations in April and January–April respectively. Finally, housing indicators were soft, with home prices, real estate investment and construction activity all falling notably so far this year in annual terms.

Panelist insight: On the property market, ING’s Lynn Song said: “The recovery of the property market remains uneven and gradual. It's possible that tariff-related pessimism and uncertainty kept more buyers on the sidelines in April. […] The secondary market continues to underperform, with only 6 of 70 cities showing existing home prices stable or higher in April, down from 14 of 70 in March. The health of the secondary market is arguably more important in terms of stabilising domestic household confidence, as these are the assets on household balance sheets. The 10bp rate cut in May could lower mortgages a little, and marginally help the property market recovery process. Data in recent months has showed a generally slower rate of decline. There are certainly silver linings in individual cities, but a nationwide turnaround has yet to be confirmed.” Nomura analysts painted a downbeat picture for the economic outlook: “We expect an evident slowdown from Q2 to Q3 and Q4, as exports front-loading [ends], the impact of the trade-in program fades and US tariffs should increase even if Washington and Beijing reach some deals. The property sector is still contracting, with a high risk of the economy suffering from a double whammy. Also, we still believe it will be quite challenging for Beijing to achieve its “around 5%” growth target unless it rolls out a sizable stimulus package. Considering the respite on the trade war, Beijing might be under less pressure to introduce the necessary stimulus and reforms.”

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