Growth in China’s factory output slowed for a third straight month last month, possibly due to disruptions caused by COVID-19 outbreaks in the nation’s southern export powerhouse of Guangdong.
The Chinese economy has largely shaken off the gloom from the COVID-19-induced slump last year, but officials yesterday said that the foundations for the recovery are not yet secure amid challenges including rising raw material prices and global supply chain disruptions, especially a shortage of microchips.
Industrial production grew 8.8 percent last month from a year earlier, slower than the 9.8 percent uptick in April, Chinese National Bureau of Statistics data showed.
That missed a 9 percent year-on-year rise forecast by analysts from a Reuters poll.
Most China watchers had expected some moderation in output last month due to softer export orders, higher cost pressures for factories and tighter environmental restrictions on heavy industry.
However, underlying activity still appears solid, even if headline growth figures are heavily distorted by comparisons with the pandemic plunge early last year, they said.
Outbreaks of COVID-19 in the Pearl River Delta since late last month have brought some key ports to a standstill, economists at Nomura Holdings Inc said in a note to clients, although it believes the current spate of infections can be contained in a relatively short period of time and backlogs cleared.
Retail sales increased 12.4 percent year-on-year last month, bureau data showed. Last month’s figure was weaker than the 13.6 percent growth expected by analysts and down from the 17.7 percent jump seen in April.
Chinese consumer and business confidence has been picking up, thanks to pent-up demand and quickening vaccine rollouts, which are also reviving domestic tourism.
Although the economy “maintained stable recovery,” there were also “uncertainties in the current global economic recovery and epidemic prevention and control,” the bureau said.
Adding to the weakness in retail sales was that fixed-asset investment increased 15.4 percent in the first five months from the same period a year earlier, versus a forecast 16.9 percent rise, slowing from January-to-April’s 19.9 percent increase.
Earlier data for last month also painted a somewhat mixed picture, with export growth easing, but imports picking up, fueled by surging demand and prices for raw materials.
Surging commodity prices pushed China’s producer inflation to its highest level in more than 12 years, squeezing profit margins for mid and downstream firms.
Bank lending unexpectedly rose last month, but broader credit growth continued to slow, a trend analysts said could start to weigh on activity in the second half.
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