China’s April retail sales and industrial value-added growth retreats raise concerns about economic recovery prospects

China’s retail sales and industrial value-added growth both fell in April from a year earlier, according to official data released Monday (May 17), sparking some concerns about the outlook for economic recovery.

Data from China’s National Bureau of Statistics (NBS) showed that the value added of industries above national scale rose 9.8% year-on-year, but that was lower than the 14.1% increase in March. Meanwhile, total retail sales of consumer goods rose 17.7 percent year-on-year, well below the 34.2 percent increase in March.

Reuters reported that China’s industrial production activity slowed in April due to bottlenecks in the global supply chain and rising raw material costs.

The report also quoted the manager of an auto parts factory in Zhejiang province as saying, “Production costs have definitely increased, leading to lower profits.”

Fu Linghui, a spokesman for China’s National Bureau of Statistics, said Monday, “Recently, the prices of industrial products have risen relatively quickly, increasing the pressure on enterprises’ production and operation.

Speaking to AFP, UOB economist Ho Woei Chen said the fall in year-on-year growth in total retail sales of consumer goods was “the more worrying aspect” as the retail sector is expected to dominate growth in the second and third quarters.

“Personal consumption is expected to continue to pick up, but the April data show that it is still lagging,” she said, adding that consumer caution due to uncertainty related to the new crown virus (CCP virus) could be behind the trend.

Some analysts expect retail sales growth to accelerate in May as Chinese people head out in large numbers for the May Day holiday. But Lu Ting, chief economist at Nomura Securities China, told AFP, “The recent small outbreak of the new crown epidemic in Anhui and Liaoning may have some impact on the momentum of the recovery in the hospitality sector.”

National Bureau of Statistics spokesman Fu Linghui also said that in addition to the new changes in the epidemic may have some negative impact on the recovery prospects of the world economy. From a domestic perspective, it is mainly the rise in international commodity prices that will have some impact.

He said: “In the short term, the rise in international commodity prices on the domestic part of the upstream industry raw material prices, may bring some pressure on the production and operation of some enterprises downstream. For the impact of rising PPI, as a whole, price increases are conducive to the improvement of business efficiency, but the pressure on the downstream industry needs to pay attention to take effective measures to strengthen the regulation of the raw material market and promote the stable and healthy development of enterprises.”

He added: “The domestic economy is still in the process of recovery, the recovery in the imbalance still exists.”