The US dollar gained ground against the Chinese yuan yesterday following the release of worse-than-expected retail sales data for April. Even the industrial production data disappointed the market. There were no other major economic releases yesterday. Overall, the USD/CNY pair gained 0.01090 (or 0.16%) to trade at 6.80834 in the last 24 hours.
According to China’s National Bureau of Statistics (NBS), the country’s retail sales declined 11.10% y-o-y in April, following a 3.50% contraction in the prior month and worse than the 6.20% decrease anticipated by economists.
In value terms, retail sales declined to 2.95 trillion yuan. Catering services revenues posted a 22.70% decline.
Between January and April, online sales of goods rose by 5.20% on a y-o-y basis. The reported figure reflects the biggest drop since March 2020 as consumers in China remained locked up at home or avoided going out due to stringent restrictions. Beijing has promised to provide the necessary support to spur growth. In this regard, the government lowered the mortgage rate for first-time purchasers of homes.
The NBS has also stated that fixed asset investment grew by 6.80% in the first four months of 2022, compared with last year, and missed the 7% growth anticipated by economists. In the similar period last year, fixed asset investment increased 9.30%.
While investment in real estate fell by 2.70%, manufacturing increased 12.20%. Also, infrastructure rose by 6.50%.
China’s industrial production contracted 2.90% y-o-y in April, following a 5% growth in the prior month and disappointed economists who were anticipating a 0.50% expansion for the reported period.
The reported figure is the lowest since the beginning of 2020. Between January and April, industrial production growth slowed down to 4%, from 6.50% posted for January- March period. Also, the country’s economy expanded by 4.80% in 1Q22.
Car production declined 41.10% y-o-y in April, as per data published by China Passenger Car Association. The auto sector represents almost 1/6th of China’s workforce and about 10% of retail sales, as per data published by the Ministry of Commerce in 2018.
The rise in COVID-19 infections and restrictions enforced to contain the spread of the disease, mainly in Shanghai, has forced production facilities to shut down or function partially.
Also, the unemployment rate inched higher to 6.10% in April, from 5.80% in the prior month. Economists had anticipated an unemployment rate of 6%.
Specifically, the jobless rate in the 31 largest cities in the country increased to 6.70%, the highest level since 2018. Additionally, the unemployment rate among individuals in the age group of 18 to 24 stood at 18.20%.
It can be remembered that the youth jobless rate was 16.80% in August 2020. Also, job openings for individuals who are nearing graduation have fallen by about 2% between January and March.
Takamoto Suzuki, chief of economic research at Marubeni – China division, forecasts an increase in the unemployment rate to 20% by this summer.
The weak Chinese economic data is expected to keep the yuan slightly bearish against the greenback in the short term.
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