China's May factory output rises less than expected

Analysts say signs of improvement continue to be seen in China ranging from steel production and car sales to more lights being turned on in industrial parks. However, they warn it could take many months for broader activity to return to pre-crisis levels.

Industrial output growth quickened to 4.4percent in May from a year earlier, the highest reading since December, official data showed on Monday. Analysts polled by Reuters had expected a 5.0percent rise from 3.9percent in April, the first expansion since the virus emerged in China late last year.

But a collapse in export orders amid global lockdowns has left factories more reliant on domestic demand, which is recovering at a more sluggish pace.

Retail sales fell for a fourth straight month. While the 2.8percent drop was smaller than the 7.5percent slump in April, it was larger than the 2.0percent fall tipped by analysts. Heavy job losses and fears of a second wave of infections continue to make consumers cautious.

Sales have fallen as shops, restaurants and other crowded places closed during the pandemic. Though strict anti-virus measures have been relaxed, consumers remain wary.

Fixed asset investment fell 6.3percent in January-May from the same period last year, compared with a forecast 5.9percent fall and a 10.3percent decline in the first four months of the year.

As in past downturns, Beijing is banking on higher infrastructure spending to lead a recovery, and steel mills have cranked up furnaces to over 92percent of capacity.

Private sector fixed-asset investment, which accounts for 60percent of total investment, fell 9.6percent in January-May, compared with a 13.3percent decline in the first four months of the year.

China's economy shrank 6.8percent in the first quarter, the first contraction on record. Highlighting the uncertain outlook, the government did not set a GDP growth target this year, the first time in nearly two decades it has not done so.

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