BEIJING (Reuters) – China reported unexpectedly weak investment and retail sales and a decline in home sales in April, clouding economic prospects as policymakers try to circumvent debt risk and defuse a hotter trade chain with the US.
Fixed assets grew slowest since 1
The only bright spot in Tuesday's activity data was industrial production, which jumped faster than expected as automotive and steel production rose sharply.
"Industrial activity has been helped by relaxation of (winter) environmental controls, but in the remainder of today's data there is evidence that the economy is losing momentum," said Capital Economics's Senior China Economist Julian Evans-Pritchard in a note after the dates.
"Given the headwinds of the credit crunch, domestic spending is likely to continue to weaken," he said, adding that the industry's recovery could be short-lived as companies rebuild their stockpiles in recent months.
Capital Economics has long predicted that China will ease policy later this year so as not to slow down growth too much.
Industrial production rose 7.0 percent in April, the National Bureau of Statistics said, outperforming forecasts for a 6.3 percent rise and rising from a 7-month low of 6.0 percent in March.
NO TRADE SHIT STILL
Sino-U.S. The impact of trade has not yet affected the Chinese economy.
But while exports and imports were surprisingly solid in April, economic surveys point to a sharp slowdown in growth in export orders, possibly because companies fear they will be stuck with high inventories if the US and China impose truce fees.
Analysts also believe that some companies will rush their deliveries to undermine any punitive measures and flatter the recent export figures.
Washington and Beijing will resume trade negotiations this week, after initial talks earlier this month had made little progress in reducing their differences.
SLOWING INVESTMENT RECOMMENDS DIFFERENT DEMAND
Investment growth slowed across the board, leading to the belief that rising borrowing costs – a by-product of regulatory action against riskier loans – are finally putting a strain on activity. Investment in fixed assets slowed to 7.0 percent in January-April compared with the previous year, while the forecast fell only slightly to 7.4 percent.
Private investment growth fell from 8.9 percent in the first three months to 8.4 percent. Private investment accounts for about 60 percent of total investment in China and has rebounded this year as spending by heavily indebted state-owned companies slows.
Infrastructure spending growth, a strong economic factor over the past year, slowed to 12.4 percent in the first four months.
Economists believe this trend will continue, Beijing is forcing local governments to pull back on investment projects to curb their debt, and cool house sales as a result of tight state controls to combat speculation and tame house prices.
China's real estate market, another key growth driver, is also showing signs of fatigue as mortgage rates rise.
Real estate investment increased 10.2 percent year-on-year in April, slowing from 10.8 percent in March, according to Reuters calculations based on official data.
Take-up fell 4.1% in April, compared to a 3.2% increase in March.
In the first four months of the year, sales grew 3.6 percent compared to the first quarter of the previous year.
The slowdown in real estate is already putting pressure on consumption and leading to weaker demand for related items, from home appliances to furniture.
Retail sales growth declined to 9.4 percent in April, with forecasts of 10 percent missing and March 10.1 percent.
While China's official data suggest that economic growth last year was remarkably stable at 6.8-6.9 percent,
economists are sticking to their predictions that in the months ahead, even without, will lose momentum any trade shocks.
Some China observers believe that the activities have already subsided significantly, although they are in the minority.
The momentum measurement of the British company Fathom Consulting ended the first quarter at 5.9 percent, while Capital Economics estimated that growth slowed to 4.8 percent at the beginning of 2018 as policy tightened.
With growing tensions between the US and the US, there are signs that Beijing is already taking preventative steps towards more supportive policies to ensure that growth does not slow down too much.
The Politburo, a top decision-making body of the Communist Party, said in April that China will work hard to achieve the economic targets for 2018 and boost domestic demand.
The Chinese central bank unexpectedly lowered reserve reserves (RRRs) for most banks hours after the soft March data last month, a move that was earlier and more aggressive than expected.
While the central bank insists that it has not postponed its "neutral" policy, economists believe further RRR cuts are likely in the coming months as policymakers seek to offset the impact of higher financing costs and trade damage on businesses ,
The weighted average loan rate for non-financial corporations, a key indicator that reflects corporate financing costs, increased 22 basis points to 5.96 percent in the first quarter, China's People's Bank said in its quarterly report.
Reporting by Kevin Yao and Cheng Fang; Writing by Elias Glenn; Arrangement by Kim Coghill