China
Property Drag Is Getting Worse, Factory Output Disappoints
Bloomberg
News
Mon, Jun 17,
2024, 9:20 AM GMT+25 min read
(Bloomberg)
-- China’s housing slump deepened in May and triggered new calls for the
government to pump cash and credit into the economy, while industrial output —
which has kept growth on track — fell short of forecasts.
Among a slew
of data published on Monday, analysts latched onto the bad news from the
property market, which has been the biggest drag on China’s economic growth.
Declines in real estate investment and home prices both gathered pace last
month.
Industrial
production rose 5.6% from a year earlier, the National Bureau of Statistics
said, slowing from April and missing the median forecast in a Bloomberg survey.
Retail sales offered some encouragement, picking up more than expected, but
Chinese shoppers remain far from recovering their pre-pandemic mojo.
The numbers
add up to a still-weak recovery, most economists said — likely requiring more
action from Beijing to bolster consumer demand and tackle imbalances, if this
year’s 5% growth target is to be met. That could take the form of stepped-up
government spending and heightened efforts by the central bank to put a floor
under housing markets and get credit flowing.
‘Most
Disappointing’
“The most
disappointing in May’s data is probably that property sales barely saw any
improvements even after so many supportive measures,” said Jacqueline Rong,
chief China economist at BNP Paribas SA. She said China’s authorities need to
find ways to lower the rates on existing mortgages, closing the gap with the
cost of new ones.
The People’s
Bank of China on Monday kept a key interest rate unchanged for the tenth
straight month. Economists say the bank’s room to cut rates is constrained by
the need to prop up the yuan, which faces downward pressure as the US Federal
Reserve reinforces its high-for-longer message.
What
Bloomberg Economics Says...
“Policy
support could make a significant difference. But the People’s Bank of China’s
focus on currency stability appears to have tied its hands on cutting interest
rates – at least until the Federal Reserve moves. This means the main support
will have to come from the recent policies to aid the property market and
government spending on big investment.”
— Chang Shu
and David Qu, economists
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