China's industrial output slowed during the first two months of the year as unemployment rose, official data showed Thursday, while some indicators showed a slowdown in the world's second largest economy stabilising. The figures from the National Bureau of Statistics come as Beijing and Washington appear to be nearing a deal to resolve their painful trade spat, and Chinese leaders convene in the capital for an annual parliamentary session.
Output growth at China's factories and workshops for the first two months slowed to 5.3 percent on-year, from 5.7 percent in December, a multi-year low and short of forecasts. "We must be aware that there are many uncertainties and instabilities from the external environment," said NBS spokesman Mao Shengyong. "The economy faces downward pressure," he told reporters.
China's normally steady unemployment rate rose to 5.3 percent in February, from 4.9 percent in December, with the NBS saying it had expected worse numbers. Chinese Premier Li Keqiang last week laid out a lower growth target of 6.0-6.5 percent this year, from 6.6 percent growth in 2018, which was already the slowest pace for almost three decades. Policymakers huddled in Beijing have talked up plans to support the economy, announcing tax cuts, fee reductions, and financing support. A plan to cut value-added tax for manufacturers will help the struggling sector.
In January and February car sales continued to fall and manufacturing activity sunk. The latest data showed growth in retail sales for January-February remained flat from December, rising 8.2 percent on-year and slightly above forecasts from economists polled by Bloomberg News.
However, retail sales remain near a 15-year low, said Julian Evans-Pritchard of Capital Economics in a note, adding that "the near-term outlook still looks downbeat". Beijing is counting on consumers and renewed investment to stabilise the economy. Fixed-asset investment rose 6.1 percent in the first two months, from 5.9 percent in 2018.
Last year investment in infrastructure crumbled as China hit the brakes on major projects such as subway lines and motorways to keep a lid on debt. Beijing has tried to restart spending. Infrastructure spending ticked up 4.3 percent on-year in January-February, from 3.8 percent last year.
Still it remains well below the near 20 percent growth seen for many years. "Infrastructure investment disappointed in the first two months, suggesting that government efforts to accelerate it have not yet yielded material impact," said Louis Kuijs of Oxford Economics.
China is grappling with a decline in global demand - most notably from the US, which launched a trade war last year. US President Donald Trump said Wednesday he sees a "very good chance" of reaching a trade deal with China but is in "no rush" to reach an agreement.
The two sides have exchanged tariffs on more than $360 billion in two-way trade, and China's exports and imports plummeted much more than expected in February. "We expect economic growth to remain under pressure in the coming months from slowing exports and still subdued sentiment," said Kuijs. The slowdown has stalled price growth in the country's industrial sector while consumer inflation has eased.
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