China’s economic data for the month of April presents a double-edged sword. Although retail sales growth disappointed, industrial production jumped back with both fists. The National Retail Federation reported July retail sales up 5.1% year-over-year, which was a letdown compared to analysts’ expectations of 5.5% growth. Further, this growth rate is less than the 5.9% increase seen in March, suggesting a rapid slowdown in consumer spending may be underway.
By comparison, industrial production still showed remarkable strength, up 6.1% year-over-year. While this was a strong performance compared to the prediction of 5.5%, this was down from growth in the previous month of 7.7%. That would be an increase from the March reading for industrial production of just 4.2%, which was already significant expansion, signaling a kaizen-style recovery within China’s manufacturing sector.
Retail Sales Growth Falls Short
China’s retail sales, one of the most important measures of consumer spending and economic vitality, fell for the first time in 16 years in April. That growth, as reported, 5.1% year-over-year was less than both the anticipated 5.5% and the prior month’s 5.9%. Here’s why—analysts outline their top reasons for the decline. Increased inflation paired with continued global economic uncertainty caused by war in Ukraine, strife in China, and other factors might be rattling consumer confidence.
This recent slowdown in the pace of retail sales growth immediately brings up worries over the sustainability of China’s economic recovery from pandemic lockdowns. Consumers are spending less as consumers pull back their spending as costs rise, so businesses must adjust their strategies to get them to spend their money. The April figures remind us how important it is to follow retail trends, as they can be a bellwether for the overall economic health of our country.
Industrial Production Shows Resilience
Compared with the declines being seen in the retail sector, China’s industrial production numbers for April show a much more positive picture. The reported increase of 6.1% year-over-year not only exceeded analysts’ expectations but signifies a rebound from the lower growth rates seen in previous months. This consistently positive outcome would indicate that the manufacturing sector is reaping the rewards of increased demand at home and abroad.
Even with this positive trend, industrial production numbers for April were a disappointment. They still fail to reach March’s record-breaking advance of 7.7%. One caveat is that this acceleration compared to the March reading of 4.2% shows the improvement in production activity is both robust and strong. Continued investment in infrastructure and technology likely will keep industrial output strong in the next few months, experts predict.
Currency Markets Respond Cautiously
After the release of relatively weak Chinese economic growth figures, currency markets responded properly. The Australian Dollar (AUD) is often considered an indicator of China’s financial wellbeing based on healthy trade links. To our surprise, it didn’t budge much after the new data came out. As things stand today, we see the AUD/USD traded pair relatively unchanged around 0.6400, indicative of traders waiting to see what happens with wider market sentiment.
The Swiss Franc (CHF) made minor movement moves against all the other major counterparts. It increased 0.04% relative to XMR and decreased 0.06% compared to BNB. Investors are anxiously assessing the overall effect of China’s disappointing economic indicators. This is driving further changes to modest shifts in global trade patterns and currency values.