China: Recovery stalls as domestic demand weakens – Commerzbank

Commerzbank’s Dr. Henry Hao notes that China’s post-Q1 recovery lost momentum in April, with industrial output at a three-year low and fixed-asset investment shrinking. Domestic consumption remains fragile as retail sales barely grew and youth unemployment rose. While property prices show tentative stabilization, policymakers are expected to keep a patient stance and delay targeted fiscal and monetary support until H2 unless weakness persists.

Growth momentum fades as risks build

"China’s economic recovery stalled in April as industrial output hit a three-year low and fixed-asset investment contracted. Surging raw material costs and sluggish retail sales highlight severe domestic weakness. Although property price declines slightly moderated, pervasive household caution persists. Chinese policymakers will likely maintain a patient policy stance, delaying targeted stimulus interventions until H2."

"The economic momentum China generated during Q1 dissolved rapidly in April, exposing the persistent vulnerabilities of a lopsided recovery. Growth decelerated across all major economic pillars as the biting effects of a global energy crisis began to heavily pressure factory floors. Industrial production slowed down to 4.1% yoy in April, representing its lowest level in nearly three years."

"Domestic consumption remains the weakest link in the recovery narrative, with retail sales growth declining to a mere 0.2% yoy in April. This reading marks the poorest consumer performance since the pandemic exit shock in late 2022, fueled by a severe slump in big-ticket, credit-intensive purchases such as vehicles and home appliances."

"Because these real estate stabilization measures take time to filter into broader household confidence, Beijing is currently maintaining a cautious, wait-and-see policy approach. While this weak April data highlights rising headwinds, we are holding our growth outlook steady for now, as we expect the government to step in with targeted fiscal and monetary interventions in if these economic challenges persist."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)