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China’s factory output slows due to bottlenecks

By Kevin Yao and Gabriel Crossley

BEIJING, May 17 (Reuters) – Chinese factories slowed production growth in April and retail sales significantly missed forecasts as officials warned of new problems affecting the recovery of the world’s second largest economy.

Although Chinese exporters are enjoying strong demand, bottlenecks in the global supply chain and rising raw material costs have weighed down production, cooling the blazing economic recovery since last year’s crash that caused the COVID-19 pandemic.

Factory production grew 9.8% in April compared to a year ago, in line with forecasts but below the 14.1% increase in March, data from the National Statistics Office showed on Monday . Retail sales, meanwhile, increased by 17.7%, much less than the forecast for an increase of 24.9% and 34.2% in March.

National Bureau of Statistics spokesperson Fu Linghui said that although the Chinese economy showed steady improvement in April, new problems are also emerging, especially rising international commodity prices.

“The fundamentals of the national economic recovery are not yet certain,” Fu told a briefing in Beijing on Monday.

“For all companies, the increase in prices favors the improvement of business efficiency, but we must pay attention to the pressure on derived industries,” he added.

China’s factory price inflation hit its fastest pace since October 2017 in April. It could continue to rise in the second and third quarters, according to a central bank report last week.

The slowdown in the growth rates of the activity indicators for April was also due, in part, to the fading of base effects, as year-on-year comparisons moved away from the steep declines that occurred when the coronavirus closed much of the country. early 2020.

In the industrial sector, growth in motor vehicle production came to a sharp halt, standing at 6.8% compared to 69.8% in the previous month, due in part to the base effect, as well as the critical shortage of semiconductors used in car systems.

Cement production growth slowed in April, and coal production fell from a year earlier, although aluminum and crude steel production reached record highs, thanks to strong demand.

“The Chinese economy shows signs of an unbalanced recovery: strong exports and domestic investment on the one hand, but weak consumption on the other,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

The travel, leisure and entertainment sectors are large employers and remain held back by the uncertainty of COVID-19, according to this analyst.

(Reporting by Kevin Yao and Gabriel Crossley; additional writing by Roxanne Liu; editing by Sam Holmes, translated by Tomás Cobos)

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