Retail sales, a key gauge of consumption, rose 5.1%, versus an up-tick of 5.9% in the previous month and weaker than economists’ projection. Growth in fixed-asset investment slowed to 4% in the first four months of the year.
The urban jobless rate fell to 5.1% in April from 5.2% in March.The offshore yuan held little changed at 7.2126 per dollar. Yields on China’s 10-year government bonds edged lower slightly to 1.67%. A gauge of Chinese stocks listed in Hong Kong pared early losses following the data.
The snapshot of the economy offers the fullest look yet at how China coped with a drastic escalation in trade tensions with the US. While the two sides in May reached a 90-day truce in their tariff war, the uncertainty surrounding further negotiations toward a final deal could keep businesses cautious about expanding production or investing in new projects.
Still, the surprise performance of industrial production provides further evidence that China was able to dodge a steep slowdown as it navigated the onset of Donald Trump’s trade war. Exports in April also rose more than forecast, as companies diverted goods to Southeast Asia and Europe to compensate for a plunge in shipments to the US.
A few major international banks including Goldman Sachs Group Inc. upgraded their forecasts for China’s 2025 growth last week, although their views remain below Beijing’s target of around 5%. Many economists are also expecting the de-escalation to buy the government more time before it needs to deploy more stimulus to prop up the economy.
The agreement “between the US and China could have reduced tariff uncertainties while domestic policymakers could further switch into a wait-and-see mode,” Citigroup Inc. economists including Xiangrong Yu wrote in a note last week.
Morgan Stanley economists including Robin Xing have dialed back their expectations on a supplementary fiscal package to up to 1 trillion yuan ($139 billion) in the fourth quarter, from a previous forecast of as much as 1.5 trillion yuan in July-September.
But the weakening retail sales numbers for April suggest the boost from a government program to subsidize purchases of new consumer products like phones and home goods is fading, pointing to the need for more supportive policies.
Consumer sentiment has remained fragile amid a years-long property slump and concerns the trade war could cause layoffs in China’s massive manufacturing and export sectors. Time deposits as a share of all household accounts reached an all-time high in April, suggesting people could have “stayed in a deleveraging mode,” according to the Citi economists.
