Chinese industrial production disappoints in May amid weak demand

Investing.com -- Chinese industrial production grew less than expected in May, data showed on Thursday, as the country’s massive factories struggled with weakening local and foreign demand.

Industrial production grew 3.5% in May from the prior year, data from the National Bureau of Statistics showed. The reading was lower than expectations for a rise of 3.8%, and also much lower than the 5.6% growth seen in April.

Year-to-date, growth in industrial production remained steady at 3.6%, slightly higher than the 3.3% seen in the first five months of 2022.

Thursday’s reading marks the fourth straight month that industrial production growth has disappointed markets, as local economic activity saw only a moderate pick-up after the lifting of anti-COVID measures earlier this year.

Chinese manufacturers are also grappling with a severe slowdown in overseas demand for locally produced goods, as economic conditions worsen across the globe.

Weakness in manufacturing has seen investors question the scope for a strong Chinese economic rebound this year. The decline comes even as the government rolled out a slew of stimulus measures over the past few months, most notably cutting interest rates this week. 

While sectors such as automobiles saw steady production, a slowdown in construction activity - which is a main driver of Chinese economic growth - has weighed heavily on the industrial sector. Analysts recently said that weakness in the property sector is expected to stymie overall growth in China in the coming years.

Other facets of the world’s second-largest economy also pointed to a slowing recovery, as retail sales grew less-than-expected in May. Retail sales rose 12.7% in May from last year, missing expectations for growth of 13.7% and falling sharply from the 18.4% growth seen in April.

The manufacturing sector is a key driver of China’s economy, with a slowdown in the space expected to eventually spill over into other sectors.

This kept capital investment in the country largely limited, with fixed asset investment growing at a slower-than-expected 4% in May.

 China’s unemployment rate remained steady at 5.2%, data showed on Thursday.