China’s Industrial Production Rises, but Domestic Consumption Remains Low

China’s economy showed signs of recovery in May after the previous month’s slump, driven by an unexpected increase in industrial production. However, consumption remains weak, challenging policymakers under pressure from the tight COVID-19 control.

Reviving growth in the world’s second-largest economy after businesses and consumers were hit by full or partial shutdowns in dozens of cities in March and April. This included a prolonged shutdown in the commercial center of Shanghai.

The National Bureau of Statistics (NBS) said Wednesday (June 15) that industrial output rose 0.7% in May from a year earlier after falling 2.9% in April.

The increase in the industrial sector was supported by the easing of COVID-19 control measures and strong global demand. China’s exports grew at double-digit rates in May. Various factories resumed work and logistical problems were resolved.

The mining sector leads with a 7% increase in annual production in May. In the manufacturing sector, growth was only 0.1%, mainly due to the production of new energy vehicles, which increased by 108.3% year-on-year.

However, consumption is weakening. This included concerns about employment, which remained weak as shoppers in Shanghai and other cities stayed home. Retail sales fell 6.7% in May from a year earlier and 11.1% from the previous month.

Sales in the catering industry, a sector sensitive to COVID-19 measures, contracted 21.1% in May, compared to a 22.7% decline in April.

In addition, employment remains a major problem. The nationwide unemployment rate fell to 5.9% in May from 6.1% in April. It is thus still above the government’s 2022 target of less than 5.5%.

In particular, the unemployment rate surveyed in 31 major cities rose to 6.9%, the highest level since records began.

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