China’s factory output, retail sales, investment all miss expectations

But they said underlying activity still appears solid, even if headline growth figures are heavily distorted by comparisons to the pandemic plunge early last year.

Outbreaks of coronavirus in the Pearl River Delta

since late May 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 and backlogs cleared.

Retail sales rose 12.4 per cent year on year in May, weaker than 13.6 per cent growth expected by analysts and down from the 17.7 per cent jump seen in April.

Chinese consumer and business confidence has been picking up thanks to pent-up demand and quickening vaccine roll-outs, which are also reviving domestic tourism.

Fixed asset investment increased 15.4 per cent in the first five months from the same period a year earlier, versus a forecast 16.9 per cent rise, slowing from January-April’s 19.9 per cent increase.

Earlier data for May painted a somewhat mixed picture, with

but imports picking up, fuelled by surging demand and prices for raw materials.

Surging commodities prices pushed

China’s producer inflation

to its highest level in over 12 years, squeezing profit margins for mid- and downstream firms.

Meanwhile, China’s crude steel output hit a monthly record in May, rising 1.6 per cent from April following resilient downstream demand and firm profit margins, despite a steep drop in margins towards the end of the month.

The world’s top steel producer made 99.45 million tonnes of crude steel last month, (NBS) data showed. That compared with 97.85 million tonnes of output in April and was 6.6 per cent higher than in May 2020.

Average daily output of the metal fell 1.5 per cent from a month earlier to 3.21 million tonnes, Reuters calculations based on the NBS data found.

It won’t cause a big change to mills’ production unless they suffer losses for longer than a month
Tang Chuanlin

Steel prices surged to an all-time high in mid-May, fuelled by firm demand at home and abroad as well as speculative buying as prices rose.

China said in late May it would strengthen price controls to address abnormal fluctuations in prices, which led to a collapse in mills’ profit margins as steel prices fell faster than raw material prices.

However, Tang Chuanlin, analyst with CITIC Securities, said the mills’ overall profits in May were still good.

“It won’t cause a big change to mills’ production unless they suffer losses for longer than a month,” Tang said before the data was released.

In the first five months of the year, China produced 473.1 million tonnes of crude steel, up 13.9 per cent from the same period a year earlier, the statistics bureau data showed.