China: Economic activity disappointed in April – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest results from the Chinese docket.

Key Takeaways

“China’s Apr macroeconomic data weakened sharply as the COVID-19 containment measures in Shanghai were prolonged which had a wider-than-expected impact on the whole country.”

“The data came in below Bloomberg’s consensus forecasts, with industrial production, retail sales and property fixed asset investment contracting in Apr while the 31 major cities surveyed jobless rate surged to a fresh record high of 6.7% from previous peak of 6.0% in the preceding month and far exceeding the 5.9% rate recorded in May 2020 when China had its first pandemic outbreak in Wuhan.”

“Despite the slump in the economic data, including a sharp slowdown in new loans in Apr, the PBoC had maintained its 1Y MLF rate unchanged at 2.85% on Mon (16 May) and conducted CNY100 bn that matured in Apr without injecting additional liquidity. With the slew of measures including the easing in mortgage loan interest rates for first time homebuyers and guiding banks to lower their deposit rates, the benchmark LPR could still be set lower this Fri (20 May) at the monthly fixing.”

“Given the magnitude of decline in economic activities in Apr, we would expect some recovery in May as Shanghai is preparing to ease its lockdown measures. However, the extent of rebound may disappoint if normal economic operations do not resume fast enough. For now, we are retaining our full-year GDP forecast for China at 4.9% for 2022.”