The Chinese economy, which had raised hopes for a rebound in the first quarter, fell back into a "domestic-demand shock" in April. Key real indicators such as consumption and production all came in below market expectations, and even investment, which had returned to growth this year, surprised the market by turning down again. Although there were expectations of a price recovery due to a recent surge in oil prices from the Iran war, concerns are growing that the recovery remains fragile as consumption and investment, which substantively support domestic demand, worsen.
China's National Bureau of Statistics released major real-economy indicators for April on the 18th. Retail sales, which combine sales from e-commerce, department stores, supermarkets and general retailers, reached 3.7247 trillion yuan (about 821.8923 trillion won), up just 0.2%. That is the lowest growth rate since December 2022, while the market had expected a 2% increase.
In particular, the retail sales growth rate excluding automobiles was tallied at 1.8%, suggesting that weak auto sales led the decline in retail sales. According to Reuters, China's domestic auto sales in April fell 21.6% from a year earlier, marking a seventh straight monthly decline.
By retail format, convenience stores and supermarkets rose 7.5% and 4.5%, respectively, from January to April, while department stores and brand specialty stores fell 1% and 5.9%, respectively.
Industrial production, which shows the trend in manufacturing activity, rose 4.1% from a year earlier, with the month-over-month increase narrowing. That is the lowest growth rate since July 2023 and fell well short of the market's 6% expectation.
Looking at the three major institutional sectors, mining rose 3.8%, manufacturing 4%, and the production and supply of electricity, heat, gas and water 5.3%. In other industries, general equipment manufacturing (5.5%), special equipment manufacturing (6.2%), automobile manufacturing (9.2%), railway, shipbuilding, aerospace and other transportation equipment manufacturing (8.2%), computer, communications and electronic equipment manufacturing (15.6%), and power and heat production and supply (6.2%) grew above average.
By contrast, wine, beverage and refined tea manufacturing (-1.4%), textiles (-2.3%), chemical raw materials and chemical products manufacturing (-5.3%), and nonmetallic mineral products manufacturing (-6.5%) declined.
Fixed assets investment (excluding rural areas), which reflects conditions in real estate, manufacturing and infrastructure from January to April, returned to contraction, falling 1.6% versus expectations for a 1.7% increase as in the previous period. Fixed assets investment by state-owned enterprises rose 2.5%, but the private sector fell 5.2%, leading the decline.
Real estate development investment from January to April fell 13.7% from a year earlier. The decline, which had narrowed this year after dropping to -17.2% at the end of last year (cumulative annual basis), improved to -11.1% in January–February and -11.2% in January–March, but widened again in April.
By contrast, the external institutional sector was relatively firm. Exports in April rose 14.1%, beating the market forecast of 7.9%. This is seen as the result of overseas buyers stockpiling volumes amid concerns about supply chain disruptions from the Iran war. The urban unemployment rate edged down to 5.2% from 5.4% in March.
Reuters said, "The April indicators show early signs that first-quarter growth is already weakening," adding, "Better-than-expected export performance and domestic energy price controls have partially offset the shock from the Iran war, but if the war drags on, rising expenses could erode manufacturers' profits and further worsen household expenditure."
Bloomberg said, "With U.S.-China trade relations stabilizing following a visit to China by U.S. President Donald Trump, exports are expected to remain strong, but a rebound in domestic consumption looks distant," adding that policymakers still appear cautious about additional stimulus.