Photographer: Anthony Kwan/Bloomberg

China Data Seen Showing Consumers Steady, Factories Downshifting

China’s next batch of economic data is expected to signal that consumption remained steady while industrial momentum softened a bit in the world’s second-largest economy.

Data on Wednesday will show retail sales growth was unchanged last month while growth in factory output and investment both edged down for a second month, economists say. That would reinforce expectations that economic growth will slow in coming months from the first quarter’s 6.9 percent expansion.

Here’s what key indicators are expected to show, according to Bloomberg surveys:

  • Retail sales rose 10.7 percent from a year earlier for a second month in May
  • Factory output rose 6.4 percent on year, compared with 6.5 percent in April
  • Fixed-asset investment growth in urban areas edged down to 8.8 percent in the first five months of the year from 8.9 percent in the first four months

While forecasters see full-year growth exceeding the government’s 6.5 percent objective as trade and the global economy pick up, some gauges show activity faltering. Authorities tightening regulations to reduce risk in the financial system have also boosted interbank borrowing costs, weighing on the outlook for the credit that supports the economy.

"There are signs of the current mini-cycle peaking, although the slowdown has been very gradual and will likely remain so," Wang Tao, head of China economic research at UBS Group AG in Hong Kong, wrote in a recent note, referring to the economy.

Private surveys confirmed the softening. Standard Chartered Plc’s Small and Medium Enterprise Confidence Index slipped to 56.9 in May from 58 in April, and a sales managers index from London-based research firm World Economics slid to a six-month low

Global financial market experts also were much less confident, according to a survey of the China Economic Panel, a joint project of The Centre for European Economic Research (ZEW) in Mannheim, Germany, and Fudan University in Shanghai.

Factory engines are slowing. Despite the official manufacturing gauge holding at 51.2 for a second straight month in May, a manufacturing index based on satellite imagery slipped below 50 this month, signaling contraction for the first time since August. A private factory gauge also fell below 50 in May, adding to evidence that the year’s robust start has leveled off.

The consumption picture remains robust. Travelers checked in more at luxury hotels and spent more at restaurants in May, according to data from China UnionPay Co., operator of the nation’s largest bank card network. That’s partially due to a seasonal peak in summer.

Spending rose across multiple categories last month, including home appliances, according to JD Finance, a unit of Inc., the nation’s second-largest e-commerce company.

Vehicle sales fell 0.1 percent from a year earlier last month, according to the China Association of Automobile Manufacturers, compared with a 2.2 percent decline the prior month. Box office sales held up at 3.9 billion yuan ($574 billion), near the average level over the past year, according to entertainment researcher EntGroup. The Indian film Dangal led at theaters, but still fell short of the blockbuster The Fate of the Furious in April.

Property sales also eased for a third month, according to a Bloomberg leading index tracking washing machine output to forecast real estate momentum.

— With assistance by Jeff Kearns, and Xiaoqing Pi

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