China retail sales jump, industrial output slows

[May 13, 2009]  SHANGHAI (AP) -- Resilient demand from Chinese shoppers helped push retail sales up 14.8 percent in April, but a paltry rise in industrial output sapped hopes for a fast recovery.

The mixed signals were typical of the data for April, when exports plunged while investment soared -- casting doubt on claims the economy is poised for a return to faster growth in the second half of the year, as many economists forecast.

Retail sales, at 934.3 billion yuan ($136.8 billion) in April, have remained relatively firm, growing 15 percent in the first four months of the year, the National Bureau of Statistics reported.

It said growth in demand was strongest for food, clothing, autos and home decoration materials.

The expansion in urban retail sales, which rose 13.9 percent from a year earlier, was outpaced by a 16.7 percent jump in sales in the vast countryside.

Even the bullish retail spending figures may be suspect, since they include government purchases, said Alaistair Chan, an economist with Moody's Economy.com in Sydney.

"Unfortunately it does appear that domestic demand is weaker than the headline number suggests," Chan said in a report.

"Other data show that tax collections are falling, savings are rising and consumer prices are falling, all of which suggest a slowing of domestic demand."

China reported Wednesday that industrial output climbed only 7.3 percent year-on-year in April, lower than expected and well below the 8.3 percent growth seen in March.

A 22.6 percent fall in exports in April from the year before prompted the government to warn Tuesday that a recovery remains dependent on improved global conditions.

About a quarter of China's manufacturing capacity is idle thanks to the global slowdown, according to some estimates, and more than 20 million people have lost their jobs as a result.

Much of the manufacturing sector remained weak in April, with electricity generation -- a key indicator of industrial activity -- falling 3.5 percent to 271.3 billion kilowatt hours, compared with a 1.3 percent decline in March.

Some key sectors are still growing at double-digit rates: auto production rose nearly 18 percent from a year earlier to 1.18 million vehicles, with passenger car output up 17.3 percent to 589,000 units, the Statistics Bureau reported.

That coincided with a 37 percent year-on-year increase in passenger car sales in April, to 830,000 units, thanks largely to tax cuts and other incentives.

Cement output likewise jumped, by 13 percent to 150 million tons, as construction backed by a 4 trillion yuan ($586 billion) stimulus package accelerated.

While the boost from incentive-driven vehicle purchases may not be sustainable, looking forward manufacturing will get support from the government's massive investment in construction and other projects, economists say.

"The rollout of China's fiscal stimulus package will spur demand in a wide range of industries, supporting increased production in the months to come," said Jing Ulrich, chairwoman for China equities at J.P.Morgan.

[Associated Press; By ELAINE KURTENBACH]

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