China economy rise, vital consumer demand still needs to boost

Factory output rose in April as China’s virus-battered ecomy reopened but job losses depressed consumer spending, a key driver of growth, challenging ruling Communist Party's push to revive rmal activity. Investment in factories and or fixed assets also improved as businesses reopened after China’s deepest ecomic slump since at least 1960s, official data showed Friday.

China, where pandemic began in December, was first ecomy to shut down to fight virus and first to start reopening in March. Automakers and some or manufacturers say production is back to rmal, but retailing and or industries are struggling.Friday’s report “shows only small and grual improvements in ecomic activity,” Iris Pang of ING said in a report.

ruling party has handed out shopping vouchers, cut taxes and promised entrepreneurs low-interest loans after first-quarter activity shrank 6.8% from a year earlier. Still, forecasters expect little to ecomic growth this year. Factory output rose 3.9% in April from a year earlier, an improvement over previous month’s 1.1% contraction. Manufacturers have been hurt by weak demand for exports in United States, Europe and or major markets that have closed to fight virus.

Consumer spending, a major ecomic driver, shrank 7.5% from a year earlier, depressed by widespre job losses. That was an improvement on March’s 15.8% contraction but still dragged on overall growth. Ecomic growth “w relies largely on domestic demand,” said Tommy Wu of Oxford Ecomics in a report. “Improvement in consumption momentum is likely to continue, albeit from a weak starting point.”

scale of job losses as retailers, restaurants and export-driven factories close due to lack of demand is unclear but private sector analysts say total could run as high as 30 million. Investment in fixed assets, second-biggest driver of ecomic growth, shrank by 10.3% from a year ago but that was better than first quarter’s 16.1% contraction. Consumer inflation eased to 3.3% over a year ago from March’s 4.3%, but food costs surged 14.8%. That was driven by a 96.9% jump in price of pork due to an outbreak of African swine fever that has disrupted supplies.

Exports, reported earlier, rose 3.5% in April over a year ago, rebounding from previous month’s 13.3% contraction. But forecasters warn exporters are likely to face a second dip as foreign buyers cancel orders. “This will become more obvious in May as global demand weakens in response to high unemployment in U.S., UK and European ecomies," said ING's Pang. April auto sales, reported this week, fell 2.6% from a year earlier, but that was better than March’s 48.4% contraction in industry’s biggest global market.

(Im credit: Representative Im)