China's economy stumbles amid mounting geopolitical pressures

(Sharecast News) - China's economy faltered in April, official data showed on Monday, with both retail sales and industrial production significantly undershooting forecasts.

According to the National Bureau of Statistics, retail sales rose by just 0.2% last month, a notable slowdown on March's 1.7% uplift and well below expectations for a 2% rise. It was the slowest month of growth since 2022.

Dragging down the figure was a 15.3% slump in car sales, although there was weakness elsewhere, including a 15.1% slide in household appliances. Gold and jewellery sales were also sharply lower.

Industrial output, meanwhile, grew by 4.1%, weaker than the previous month's rate of 5.7% and below forecasts for a 5.9% hike.

House prices also remained under pressure, while fixed asset investment fell by a surprise 1.6%, in sharp contrast to March's 1.7% rise.

An NBS spokesperson said: "The international environment was complex and severe, the spillover effects of geopolitical conflicts continue to emerge, global energy markets fluctuated at high levels and the difficulty of the world economic recovery increased."

The outbreak of war in the Middle East at the end of February has sent global energy prices soaring, reigniting inflation fears and weighing heavily on both business and consumer sentiment. It is also increasingly disrupting supply chains.

Asia has been particularly affected by the conflict, as the region relies heavily on the Middle East for much of its energy

Ipek Ozkardeskaya, senior analyst at Swissquote, said the data "looked particularly bleak", with the weakness "largely explained by heavy disruption linked to the Iran war".

Lynn Song, chief economist, Greater China, at ING, said: "The softness of industrial production was surprising, given the strong export data that we have been seeing in recent months. A look at the subcategories suggests that this export-driven momentum is still supporting the data, with auto, rail, ships and airplanes, and computer, communication and other electronic equipment manufacturing, all well outperforming headline growth.

"However, sluggish domestic activity is dragging many other categories.

"The impact of the Iran war is also appearing in the data. Crude oil processing volume fell 5.8% year-on-year on the month."