A raft of economic data poured out of China’s National Bureau of Statistics on Thursday. But the key element revolved around disappointing retail figures, with sales rising 8.5% last month, a significant drop compared to an increase of 9.4% in April.
Analysts had predicted a jump of 9.6%, but the number was still higher than the same period last year with sales topping 3.04 trillion yuan (US$475 billion).
Still, retail sales in May expanded at the slowest pace since June 2003, according to calculations by Reuters.
To add to the mood that the economy is running out of steam as Beijing clamps down on excessive borrowing in a move to curb ballooning debt, industrial output increased by just 6.8% last month compared to a rise of 7% in April.
This, in turn, resulted in “a rather sluggish growth picture.”
“After seasonal adjustment, all the indicators point to a rapidly slowing momentum,” Zhou Hao, an analyst at Commerzbank, told the Financial Times. “There is a clear spill-over effect from financial deleveraging.”
Another key driver of economic growth also showed that infrastructure spending slowed to 9.4% in the first five months, compared to a leap of 12.4% between January and April.
At least the construction boom showed no signs of cooling with data from the China Construction Machinery Association highlighting that sales of excavators doubled in May from a year earlier.
This was probably fueled by ongoing infrastructure projects at home, as well as major developments involved in President Xi Jinping’s all-encompassing Belt and Road Initiative.
Looking at the big picture, first-quarter GDP growth was better than expected but could slow to 6.5% this year from 6.9% in 2017. It might drop even lower if China’s trade dispute with the United States escalates in the months ahead.
There are also other factors to take into account, according to Wang Yuanhong, an economist at China’s State Information Center, a government think tank.
“We should be ‘clear-headed’ about China’s development phase,” Wang told the state-owned China Daily, adding that Beijing is still grappling with a gap between urban and rural communities, weak in industrial competitiveness and technological innovation.
“We should look at both economic aggregate and per capita figures when measuring the real development level of a country,” Wang said.
“It means Chinese still have to spend big on basic needs, and their expenditure on culture, healthcare, entertainment and tourism are much less than people in developed countries,” he continued.
“China’s industrial structure [also] needs upgrades,” Wang added. “The share of the primary sector is too big, and manufacturing … remains low at the global value chain, while the proportion of knowledge-intensive services is small.”
These latest figures tend to bear him out as Beijing continues to pursue policies through the “Made in China 2025” program, which will allow the world’s second-largest economy to switch to a high-tech future.