BEIJING – China’s economic activity cooled across the board last month, undoing a brief surge earlier in the year and raising questions about the economy’s vitality even before higher US tariffs start to bite.
Factory production, retail sales and investment in fixed assets all slowed in April, coming in below market expectations, according to government data released on Wednesday. Some economists see further headwinds for the world’s second-largest economy, given the trade fight with the US is likely to damp external demand and business confidence.
Value-added industrial output, a measure of factory production, rose 5.4 percent in April from a year earlier, slowing from an 8.5 percent year-over-year increase in March, the National Bureau of Statistics said.
Overall, some economists said that after a surge in March, demand looks slack across the economy, with consumers and businesses shrugging off tax cuts and other government measures to boost consumption.
“We had expected a slowdown in April from March, but the extent of slowdown turned out much bigger than we had thought,” said Ning Zhang, an economist at UBS. He said unusually large amounts of stimulus early this year frontloaded growth, taking away some of the momentum for April and possibly May.
Retail sales rose 7.2 percent in April from a year earlier, decelerating from March’s 8.7 percent growth-the slowest pace in more than 16 years.
Investment in buildings, large machinery and other fixed assets also slowed to 6.1 percent in the January-April period, compared with a 6.3 percent pace in the first three months.
Looking ahead, said Bank of Communications economist Liu Xuezhi, trade friction with the US remains the biggest risk for the economy and so Beijing will have to ramp up efforts to stimulate domestic demand.
Housing sales by value bucked the slowing trend, rising 10.6 percent in the first four months over the year-ago period, with the pickup likely owing to easier access to credit. That compares with a 7.5 percent increase in the first quarter.
Before Wednesday’s weak data, economists expected Beijing to expand the tax cuts, easier credit and other measures begun last year to stabilize growth and counter trade tensions with Washington. With negotiations in the roughly year-old trade dispute hitting a snag, the US increased tariffs on $200 billion of Chinese goods to 25 percent from 10 percent and is considering higher levies on the roughly $300 billion in imports from China not yet covered by the punitive duties. China retaliated on Monday by raising tariffs on $60 billion in US imports.
UBS economists said in a research note that a full-on trade war could drag Chinese economic growth below 6 percent in 2019 and that Beijing will soon re-adjust policies to provide more credit and other support for the economy.
The investment bank early this week trimmed its forecast for China’s gross domestic growth rate to 6.2 percent from 6.4 percent as the trade dispute escalated and economic activity showed early signs of slowing in April.
As a result of to an escalation in trade disputes and early signs of slower activities in April,
China has set a growth target of 6 percent to 6.5 percent for 2019. In the first quarter, the Chinese economy grew 6.4 percent from a year earlier. Economists widely expect a slowdown in the second quarter before a mild recovery in the later half of the year when the stimulus efforts start to show effect.
Liu Aihua, a spokeswoman of the statistics agency, said China’s low inflation and fiscal deficit rate as well as abundant foreign-exchange reserves give the government plenty of room to support economic growth.