China's Property Sector Remains Lifeless And Factory Output Shows Dismal Performance

The property sector in China is not showing any good news as it has remained slumped for quite some time, while the county's industrial output disappointed expectations. This simply added pressure on Beijing to support growth in the dismally performing sectors.

Reuters reported that Monday's economic reports showed a bumpy recovery for the world's second largest economy. Only retail sales showed signs of life as it was able to beat forecasts, thanks to a holiday boost that helped consumer spending. The rest, unfortunately, did not fare as well.

National Bureau of Statistics (NBS) data showed that the industrial output in May grew by 5.6% as compared to the previous year. When compared to its April growth, it showed a slowdown from the recorded 6.7% rate in April. The growth fell short of the expected 6.0% increase by analysts from Reuters.

Perhaps a light in the tunnel was the 3.7% increase in retail sales in May, which was relatively higher compared to April's, which only showed a 2.3% increase. The May increase was by far the fastest growth since February. Only a 3.0% expansion from the holidays was expected but the results exceeded by 0.7%.

"May activity data and our high-frequency trackers for the first half of June suggest significant cross-sector divergences remain in the economy - strong exports and manufacturing activity, relatively stable consumption, and still-depressed property activity," said an analyst from Goldman Sachs in a note.

The country's exports has contributed greatly in giving the economy a quick boost, with aluminum and steel output showing a huge leap in May.

"Exports drove industrial growth and manufacturing investment significantly, but real estate weakness still hit household consumption and investment," said senior China strategist ZhaoPeng Xing at the ANZ.

The market slump, coupled with high local government debt and the deflationary pressure on the government put a lot of burden on China's economic activity. The latest results usher for more monetary and fiscal support.

While the overall economy showed growth in the first quarter, the property market showed worrisome inactivity. According to Bloomberg, the bad news from the said market is the biggest drag in the country's economy.

Property investment fell by 10.1% from January to May, which further showed a decline from the 9.8% between January to April.

Liu Aihua, NBS spokesperson, said in a media briefing on Monday that the property sector is undergoing adjustments and it may take a bit of time before policy measures can take effect.