China’s economy showed signs of recovery in May after slumping in the prior month, as industrial production rose unexpectedly. But consumption was still weak, underlining the challenge for policymakers amid the persistent drag from strict COVID curbs.
The data, however, provides a path to revitalise growth in the world’s second-biggest economy after businesses and consumers were hit hard by full or partial lockdowns in dozens of cities in March and April, including a protracted shutdown in commercial centre Shanghai.
Industrial output grew 0.7 percent in May from a year earlier, after falling 2.9 percent in April, data from the National Bureau of Statistics (NBS) showed on Wednesday. That compared with a 0.7 percent drop expected by analysts in a Reuters news agency poll.
The uptick in the industrial sector was underpinned by the easing of COVID curbs and strong global demand. China’s exports grew at a double-digit pace in May, shattering expectations as factories restarted and logistics snags eased.
The mining sector led the way with output up 7 percent in May from a year ago, while the manufacturing industry eked out a meagre 0.1 percent growth, mostly driven by the production of new energy vehicles which surged 108.3 percent year-on-year.
“Overall, our country’s economy overcame the adverse impact from COVID [in May] and was showing a recovery momentum,” NBS Spokesperson Fu Linghui told a press conference, adding that he expects the revival to improve further in June due to policy support.
“However, the international environment is still complex and severe, with greater uncertainties from outside. Our domestic recovery is still at its initial stage with the growth of key indicators at low levels. The foundations for recovery are yet to be consolidated.”
Retail sales slipped
That caution was underscored in consumption data, which remained weak as shoppers were confined to their homes in Shanghai and other cities. Retail sales slipped another 6.7 percent in May from a year earlier, on top of an 11.1 percent contraction the previous month.
They were slightly better than the forecast of a 7.1 percent fall due to the increased spending on basic goods such as grains, oils as well as food and beverages.
Industry data showed China sold 1.37 million passenger cars last month, down 17.3 percent from a year earlier, narrowing the decline of 35.7 percent in April.
Fixed asset investment, a key indicator tracked by policymakers looking to prop up the economy, rose 6.2 percent in the first five months, compared with an expected 6 percent rise and a 6.8 percent gain in the first four months.
China’s property sales fell at a slower pace in May, separate official data showed on Wednesday, supported by a slew of easing policy steps to boost demand amid the tight COVID-19 curbs.
The government has been accelerating infrastructure spending to boost investment. China’s cabinet has also announced a package of 33 measures covering fiscal, financial, investment and industrial policies to revive its pandemic-ravaged economy.
The nationwide survey-based jobless rate fell to 5.9 percent in May from 6.1 percent in April, still above the government’s 2022 target of below 5.5 percent. In particular, the surveyed jobless rate in 31 major cities picked up to 6.9 percent, the highest on record.
Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in the next three months.
China has set an annual economic growth target of about 5.5 percent this year, but many economists believe that is increasingly out of reach.
Chinese banks extended 1.89 trillion yuan ($281bn) in new loans in May, nearly tripling April’s tally and beating expectations. But 38 percent of the new monthly loans were in the form of short-term bill financing, suggesting real credit demand still remains weak.
The central bank on Wednesday kept the medium-term policy rate unchanged for a fifth straight month, matching market expectations.
New lockdown fears loom
While the world’s biggest manufacturer reported better-than-expected export growth in May, the subdued external demand due to the Ukraine war and robust production recovery of Southeast Asian nations threaten the country’s trade outlook.
One week after the reopening of Shanghai, the local government ordered 15 of the city’s 16 districts to undertake mass testing to contain a jump in cases tied to a hair salon.
Authorities in Beijing warned on Tuesday that the city of 22 million was in a “race against time” to get to grips with its most serious outbreak since the pandemic began.
Any potential lockdown and supply-chain disruption risks amid future COVID-19 outbreaks may constrain the rebound of the economy as Beijing has shown no sign of easing its zero-COVID policy, analysts say.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
