China’s economic data for May revealed a mixed picture, with industrial output growth slowing to 5.6% year-on-year, below expectations, while retail sales exceeded forecasts due to a holiday boost. Despite some positive signs in consumption, the property sector remains a significant drag on the economy, prompting calls for more policy support. Fixed asset investment rose 4.0% in the first five months of 2024, with robust manufacturing investment underlining China’s focus on technological growth, yet private sector confidence remains weak.
Exports have bolstered industrial growth and manufacturing investment, but the ongoing slump in the property market continues to weigh on household consumption and overall economic activity. Property investment fell by 10.1% year-on-year in January-May, with new home prices declining for the 11th consecutive month. Despite various government measures to support the housing market, including a relending program for affordable housing, the sector’s downturn persists, exacerbating economic challenges.
Beijing faces constraints in easing monetary policy due to narrowing bank interest margins and a weakening currency. While the central bank left a key policy rate unchanged, some economists predict potential rate cuts later in the year.
The job market remained steady with a 5.0% jobless rate in May, but broader economic pressures and weak domestic demand continue to hamper growth. The government has pledged further fiscal stimulus and job creation initiatives to stabilize the economy amid the ongoing property sector crisis.
Source: Reuters