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China's retail sales grow to 16-year low as trade war risks rise



BEIJING (Reuters) – China reported surprisingly weaker growth in retail and industrial production in April Wednesday, increasing pressure on Beijing to roll out more stimulus as the US trade war escalates.

FILE PHOTO: Employees work on the production line at a factory of the automaker manufacturer Power Xinchen in Mianyang, Sichuan Province, China March 28, 2019. REUTERS / Stringer / File Photo

Garments fell for the first time since 2009, suggesting that Chinese consumers grew more worried about the economy, even before a US tariff increase in Friday boosted the country's struggling exporters.

The total retail market in April increased by 7.2% from the previous year, the lowest rate since May 2003 showed data from the National Bureau of Statistics (NBS). The March forecast is 8.7% and forecasts of 8.6%.

The data suggested to consumers began to reduce the cost of everyday products such as personal care and cosmetics, while continuing to avoid more expensive things like cars.

"Weak retail trade is partly due to a deterioration of employment and declining income in the middle and low income groups," says Nie Wen, economist at Hwabao Trust.

"For future policies to keep consumption as a stabilizing economy, China can roll out targeted tax cuts or subsidies to the middle and low income groups."

As a whole, Chinese data for April was strongly pointed to a loss of momentum, after surprisingly optimistic March readings had created hope that the economy slowly returned to a firmer footing and would require less political support.

Growth in industrial output fell more than expected to 5.4% in April this year, which declines from a 4-1 / 2-year high of 8.5% in March, which some analysts suspected had strengthened of seasonal and temporary factors.

Analysts asked by Reuters had expected production would grow 6.5%.

Motor vehicle production fell almost 16% as demand weakened, with sedan production declining 18.8%, the steepest decline since September 2015. Industrial data this week showed that auto sales fell 14.6% in April, the tenth consecutive month's decline.

China's exports also fell unexpectedly in April in light of US tariffs and weaker global demand, while new factory orders from home and abroad remained sluggish.

"There are still uncertainties that go beyond the performance of the economy. Tensions between China and the US have come back, while concerns about insufficient global demand are on the rise," said no.

Not to say that China would need a more comprehensive cut in banks' reserve requirements in June before a G20 summit, where presidents Donald Trump and Xi Jinping are expected to discuss trade.

"The financial gap on the market is relatively large," does not say, adding that less targeted reductions in bank reserves may no longer be enough to stimulate stronger growth.

There is relatively large room for growth support policies, Liu Aihua, a spokeswoman at the statistical office, told reporters at a briefing and added that employment is expected to remain stable.

April Nationwide Survey Vacancy Rate Improved to 5.0% from 5.2% in March, although analysts are generally skeptical of Chinese employment data and see an increase in redundancies if export conditions worsen.

INVESTMENT

On the basis of concerns about domestic demand, Wednesday's data also showed an unexpected investment in investment.

Investment growth in fixed assets fell to 6.1% in the first four months of this year, and expectations for a small increase rose to 6.4%.

Infrastructure spending growth remained stable at 4.4%, with a sharp slowdown in cement production, possibly reflecting a slower than expected yield from Beijing's efforts to speed up road and rail projects.

China is trying to construct a construction boom, even as it pushes efforts to ease the burden on small businesses, ranging from tax credits to financial incentives to non-shedding firms.

Investments in the private sector fell sharply to 5.5% growth from 6.4%, suggesting that the sector is still facing difficulties. The private sector accounts for most jobs in China and about 60% of total investment.

One of the few bright spots in the data was real estate investment, an important growth driver.

Real estate investments in April rose 12% from the previous year, unchanged from March, according to Reuters estimates. But the demand for new homes remained weak and weighed the sales of appliances and furniture.

TRADE TENSIONS

Washington dramatically escalated its 10-month customs war with Beijing on Friday by raising $ 200 billion of Chinese goods in the midst of trade negotiations, and Trump threatened new taxes on all remaining US imports from China. , send global financial markets to a tailspin.

China retaliated Monday, but on a smaller scale.

The two sides appear to be locked in the negotiations. But Trump blew his tone on Tuesday and insisted that talks between the world's two largest economies had not collapsed.

Economists that Citi estimates US tariff increase could be 50 basis points of China's GDP growth, reduce exports by 2.7% and cost the country an additional 2.1 million jobs, although optimistic, a trade will be reached eventually.

Analysts at BofA Merrill Lynch believes that a longer period of brinkmanship would pull China's growth to 6.1% this year, from a near 30-year low of 6.6% in 2018.

They expect more political short-term easing, further cuts in banks' reserve requirements and a further increase in bank lending and consumption support to increase sales of products such as cars, appliances and smartphones.

Some companies like BMW have already lowered their prices after China has cut VAT from April 1.

"We have full confidence in China's economic prospects," said Geng Shuang, spokesman for the Chinese foreign ministry, said in a daily news briefing.

"U.S. Protectionist and bullying will have some impact on the Chinese economy, but they can be completely overcome. Of course, if some people are not willing to do business with China, others will fill this gap. "

Reporting by Kevin Yao and Yawen Chen; Additional reporting by Lusha Zhang, Judy Hua, Cheng Leng, See Young Lee and Michael Martina; Writing by Ryan Woo; Editing Kim Coghill and Jacqueline Wong

Our Standards: [19659038] Thomson Reuters Trust Principles.

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