China’s factories slowed their output growth in April and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world’s second-largest economy. While China’s exporters are enjoying strong demand, global supply chain bottlenecks and rising raw materials costs have weighed on production, cooling the blistering economic recovery from last year’s COVID-19 slump. Retail sales, meanwhile, rose 17.7 per cent, much weaker than a forecast 24.9 per cent uptick and the 34.2 per cent surge. For companies as a whole, price increases are conducive to the improvement of corporate efficiency, but the pressure on downstream industries needs to be paid attention to.
China’s factory price inflation hit its highest pace since October 2017 in April. That could rise further in the second and third quarters, according to a report from the central bank last week. The slower growth rates in the April activity indicators were also due in part to the fading base effects as year-on-year comparisons rolled away from very sharp declines seen when COVID-19 shut down much of the country in early 2020. In the factory sector, motor vehicle production growth fell sharply to 6.8 per cent from 69.8 per cent, due in part to the base effect as well as critical shortages of semiconductors used in car systems. Growth in the production of cement slowed in April, and coal production fell on year, although aluminum and crude steel output hit record highs, helped by firm demand.