A decline in real estate in China overshadows the recovery in spending in May, challenging Beijing’s economic goals

Real estate investment fell 10.1 percent year-on-year in the first five months of 2024, worsening from a 9.8 percent decline in the January-April period and a 9.5 percent decline in the first quarter.

We must acknowledge that it will take some time before the effects of policy measures become apparent

Liu Aihua, spokeswoman for the National Bureau of Statistics

The floor area of ​​new homes sold fell by 20.3 percent in the first five months of the year compared to the same period in 2023. The total value of new home sales fell by 27.9 percent year-on-year.

“We must acknowledge that it will take some time for the effects of the policy measures to emerge, and the real estate market is still in the adjustment stage,” bureau spokeswoman Liu Aihua said during a press conference on Monday. “The overall performance of the national economy has been stable.

“However, we must realize that the external environment is complex and severe, effective demands are still insufficient at home, and sustainable economic recovery still faces multiple difficulties and challenges.”

Harry Murphy Cruz, an economist at Moody’s Analytics, said that the measures taken by China to support the real estate sector will have an impact, but will likely not solve the larger problem. They are more likely to succeed in first-tier cities where populations rise as wages rise, he said.

However, it is “just a drop in the ocean compared to the scale of China’s housing problems,” Murphy-Cruz said. “These supports are intended to slow the sector’s declines and wait for it to naturally find a footing.”

Retail sales growth, a measure of consumption, rose 3.7 percent year-on-year last month, compared with 2.3 percent growth in April.

Spending swelled during the five days in China Labor Day holidayWhen officials tracked 295 million domestic trips. Labor Day tourism revenue reached 166.89 billion yuan (US$23 billion), up 12.7 percent from the previous year and up 13.5 percent from 2019.

“Retail sales actually exceeded our expectations, reflecting reasonable growth in household income,” said Xu Tianchen, chief economist at the Economist Intelligence Unit. “However, weak auto sales were a major drag on stronger growth.”

China’s retail automobile sales reached 388 billion yuan in May, down 1.4 percent year on year, according to Postal calculations based on NBS data.

“This likely reflects the fact that demand was loaded from 2022 to 2023. Recent efforts to expand demand, e.g. Car trading software“It didn’t come to fruition,” Shaw said.

As for the decline in real estate investment in China, Xu said that this “reflects the deep decline in the real estate sector, which calls for the need for more political stimulus.”

Meanwhile, the country’s industrial output grew by 5.6 percent last month compared to May 2023, after a 6.7 percent year-on-year rise in April.

“Economic activities were stable in May,” said Zhang Qiu, chief economist at Pinpoint Asset Management. “Industrial production slowed while retail sales improved moderately in May compared to April. But this may be partly driven by the fact that there were two extra working days in April this year compared to last year, while working days in May this year and last year were Are the same.

“High-frequency data indicate that economic momentum in June was weak. The batch of policy easing measures in the real estate sector has not yet succeeded in boosting demand from homebuyers nationally. At the same time, external demand appears to have remained strong to keep industrial production growing at a steady pace.” Faster than retail sales.

Some analysts say the trade tariffs proposed by the United States last month on 14 categories of products made in China, including semiconductors and electric cars, will refocus the government’s attention on the domestic market.

“Growth is coming from a combination of exports and investment, especially in the manufacturing sector,” said Christopher Beador, deputy director of China research at Gavical Dragonomics. “Domestic consumption is clearly very weak.”

The urban unemployment rate in China surveyed was 5 percent last month, unchanged from April.

Gary Ng, chief economist at Natixis Corporate and Investment Bank, said it would be a bit difficult for China to reach this year’s GDP target.

“The estimate now is that the Chinese economy will reach a 4.8 percent growth level in 2024 if we do not see the implementation of further” policy measures, Ng said.

“The whole situation is very challenging because some of the problems we see in the economy have not really seen much improvement,” he added. “Of course, industrial production is still growing very quickly, but at the same time, there is clearly a question about whether some Chinese sectors may face excess capacity.”

Additional reporting by Alice Lee

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