Growth in China’s factory output slowed for a third straight month in May, likely weighed down by 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 Chinese 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 on Wednesday -- but resurgent COVID infections and lockdowns are holding back broader-based recoveries.
Chinese industrial production rose 8.8% in May from a year ago, slower than the 9.8% uptick in April, National Bureau of Statistics data showed on Wednesday, missing a 9.0% on-year rise forecast by analysts from a Reuters poll.
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-19 in the Pearl River Delta since late May also have brought some key ports to a standstill, economists at Nomura said in a note to clients, though it believes the current spate of infections can be contained in a relatively short period of time.
Fu Linghui, an NBS official, said external risks also remain, such as still rising global COVID-19 infections, an uneven recovery in the world economy and spill-over effects from large stimulus programmes from some countries.