China's monthly data dump showed industrial production increased 8.8% year on year in May, retail trade growth slowed to 12.4% on year in May and urban unemployment was down to 5.0%, according to state data Wednesday.
Softer export orders, rising commodity prices and factory costs and a virus outbreak in southern China disrupted port services and delayed deliveries. Figures came in below market forecasts of a 9% rise for production, National Bureau of Statistics data showed.
Production fell for textiles and chemicals, the bureau said.
Retail trade growth slowed to 12.4% year on year in May from 17.7% in the previous month and below market expectations of 13.6%. "The latest figures continued to point to a solid improvement in domestic demand, but also indicated more pressure on the consumption recovery," the bureau said late Wednesday.
China's unemployment for those aged between 16 years and 24 years and 25 years to 59 years was 13.8% and 4.4%, respectively. "Meanwhile, the surveyed unemployment rate in 31 major cities and towns was 5.2%, the same as in April. The average weekly working hours of employees in enterprises across the country was 47.3 hours. From January to May, 5.74 million new jobs were created in cities and towns across the country," the bureau said.
Growth in China's factory output slowed for a third consecutive month in May on disruptions caused by Covid-19 outbreaks in the country's southern export powerhouse of Guangdong.
Retail sales and investment growth also came in below market expectations, but analysts say underlying activity still looks quite solid, noting headline readings remain highly distorted by comparisons to the pandemic plunge early last year.
The economy has largely shaken off the gloom from the coronavirus slump, but officials warn its recovery remains uneven amid challenges including soft domestic demand, rising raw material prices and global supply chain disruptions.
China's rapid recovery last year and a U.S. rebound this year have sharply boosted Asia's export-reliant economies - Japan posted its strongest export growth in 41 years Wednesday -- but resurgent Covid infections and lockdowns are holding back broader-based recoveries, Reuters reported.
Industrial production rose 8.8% in May. In particular, the output of auto vehicles fell 4% from a year earlier, compared with an increase of 6.8% in April, crimped by a global chip shortage.
"This is a normal cyclical slowdown after an economic recovery. In a nutshell, we can see the economic rebound is peaking," said Hao Zhou, senior EM economist Asia, Commerzbank.
"The extent of the slowdown in the second half is key. So far, it's still normal and there's still room for the fiscal policy to play a part later in the year."
Most analysts had expected some moderation in May output due to softer export orders, higher input costs for factories and tighter environmental restrictions on heavy industry.
Outbreaks of Covid in the Pearl River Delta since late May also have brought some ports to a standstill, economists at Nomura said - though it believes the current spate of infections can be contained in a relatively short period of time.
Fu Linghui, a bureau official, said external risks also remain, such as still rising world Covid-19 infections, an uneven recovery in the world economy and spill-over effects from large stimulus programs from some countries.
Capital Economics senior China economist Julian Evans-Pritchard said "headline growth on all the key indicators dropped back last month. But after adjusting for base effects the picture was more mixed, with investment slowing, industrial output growth holding steady and retail sales accelerating. While there is still scope for a further recovery in consumption, we think investment and exports are set to cool over the coming months."
"The headline growth rates don't tell us much about the economy's current momentum, however, since they remain distorted by base effects from last year's Covid-19 downturn. Instead, it makes sense to focus on seasonally adjusted month-on-month changes."
"Property sales dropped back last month but remain strong. We think the elevated household saving rate during the pandemic has temporarily propped up demand for new housing and doubt the current strength will be sustained over the medium-term. Property construction looks even more ripe for a slowdown given that it has run ahead of demand and developers are facing tougher restrictions on their borrowing. There are some signs that developers are turning more cautious. Property starts edged up in May but have been trending down in recent months," he said.
"The recovery in consumption may slow somewhat this month given the recent virus flare-up in southern China, the country's worst since January. There was little improvement in tourism spending during this week's Dragon Boat Festival relative to last month's Labor Day Holiday. Further ahead though, we think there is still scope for strong rises in consumption as the virus situation comes under control and the vaccination roll-out broadens. On a daily basis, tourism spending was still down by over a fifth relative to 2019 during both of the recent holidays. And restaurant sales remained 12% below its pre-pandemic trend last month."
