China Property Drag Is Getting Worse, Factory Output Disappoints

 

China Property Drag Is Getting Worse, Factory Output Disappoints

 

Bloomberg News

Mon, Jun 17, 2024, 9:20 AM GMT+25 min read

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(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