China's industrial production growth decelerated more than anticipated in May, while property investment further weakened despite supportive measures, according to official data released on Monday.
The National Bureau of Statistics reported that industrial production growth declined to 5.6 percent in May, down from 6.7 percent in April. Analysts had forecast a more moderate slowdown to 6.2 percent.
On a brighter note, retail sales saw an accelerated growth of 3.7 percent year-on-year following a 2.3 percent rise in April. This marks the fastest growth since February and surpassed the expected 3.0 percent increase.
For the first five months of 2024, fixed asset investment grew by 4.0 percent compared to the same period last year, slowing from the 4.2 percent rise recorded from January to April. Notably, real estate investment fell by 10.1 percent in the first five months, a deeper decline than the 9.8 percent decrease seen in the January to April timeframe.
Investment from the private sector showed minimal growth, increasing by just 0.1 percent during the January to May period.
Today, the People's Bank of China conducted a one-year medium-term lending facility (MLF) operation amounting to CNY 182 billion, maintaining the interest rate at 2.5 percent. The MLF serves as a benchmark for loan prime rates.
Additionally, the central bank injected CNY 4 billion through seven-day reverse repos at an interest rate of 1.8 percent.
These economic data points strengthen the argument for a rate cut, potentially prompting the People’s Bank of China to proceed with a reduction even if the Federal Reserve holds its rates steady, as noted by Lynn Song, an economist at ING.
Song anticipates two rate cuts of 10 basis points each before year-end, though this could potentially be consolidated into a single larger rate cut depending on policymakers' objectives.
