China's factory output slowed slightly in April but showed unexpected resilience, pfficial data showed on Monday as government support measures may have cushioned the impact of a trade war with the United States.
Industrial production in the export powerhouse grew 6.1% year-over-year in April, according to figures published by the National Bureau of Statistics (NBS).
The reading was higher than the 5.7% forecast in a Bloomberg survey and a 5.5% rise in a Reuters poll, but still lower than the 7.7% jump recorded for March.
"The national economy withstood pressure and grew steadily in April," the NBS said, acknowledging a "complex situation of increasing external shocks and layered internal difficulties and challenges."
Last week, China and the U.S. agreed to slash sweeping tariffs on each other's goods for 90 days, raising hopes that the global economy can avoid a major downturn.
"April's resilience is in part a result of 'frontloaded' fiscal support," said Tianchen Xu, senior economist at the Economist Intelligence Unit, referring to stronger government spending.
The data followed firmer-than-expected exports earlier this month that economists said were supported by exporters rerouting shipments and countries buying more materials from China amid a reordering of global trade due to U.S. President Donald Trump's tariffs.
In addition to heightened trade tensions, Beijing has also been battling a persistent slump in domestic spending, threatening its official growth target of around 5% this year.
Data on Monday showed retail sales, a key gauge of domestic demand, grew 5.1% year-on-year last month, short of the 5.8% growth forecast by Bloomberg and the 5.5% estimate by Reuters.
The reading also marked a slowdown from March's 5.9% growth.
"China's foreign trade has overcome difficulties and maintained steady growth, demonstrating strong resilience and international competitiveness," Fu Linghui, statistics bureau spokesperson, told a news conference on Monday. He added that the trade de-escalation would benefit bilateral trade growth and global economic recovery.
But economists have warned that the short-term truce and Trump's unpredictable approach will continue to cast a shadow over China's export-driven economy, which still faces 30% tariffs on top of existing duties.
By midday, China's blue chip CSI300 Index dropped 0.4% and the Shanghai Composite Index lost 0.1%. The yuan currency also slipped against the dollar.
The property sector also has yet to show signs of recovery, with home prices stagnating and investment in the sector shrinking.
Economists attributed the slowdown in retail sales to the impact of U.S. tariffs on consumer expectations and tepid demand at home.
Commodity sectors also showed signs of weakness, with the country's daily crude oil processing rate down 4.9% in April from March, while crude steel output slid 7% month-on-month.
Meanwhile, the government's push to boost household spending via a trade-in scheme for consumer goods led to a 38.8% gain in home appliance sales.
The NBS data also showed the unemployment rate fell to 5.1% from 5.2% in March. But anecdotal evidence showed that some factories heavily reliant on the U.S. market have sent their workers home.
With persistent deflationary pressures and worse-than-expected bank lending data, economists highlighted the need for more policy support to foster a sustainable recovery.
"We caution that the near-term growth strength is at the cost of payback effects later and believe more policy easing is necessary to stabilize growth, employment and market sentiment," Goldman Sachs economists said in a note.
China's economy expanded 5.4% in the first quarter, exceeding expectations. Authorities remain confident of achieving Beijing's growth target of around 5% this year, despite warnings from economists that U.S. tariffs could derail this momentum.
Alarmed by how tariffs have hurt economic activity, authorities announced earlier this month a package of stimulus measures, including interest rate cuts and a major liquidity injection.
The monetary easing measures were announced before the China-U.S. trade detente was reached after high-stakes talks in Geneva, marking a significant de-escalation from months of mounting tensions.
The U.S.-China "deal" agreed at the start of last week will provide some relief, said Julian Evans-Pritchard, head of China Economics at Capital Economics, "but even if the tariff rollback proves durable, wider headwinds mean that we still expect China's economy to slow further over the coming quarters."
"We suspect that the trade war has made households more concerned about their job prospects and therefore more careful about their spending."
