Chinese industrial output, fixed investment cool in April

Economic activity in Asia's largest economy was weaker-than-expected last month as presaged by recent purchasing managers' indices for factory and services sector activity.

Industrial output growth in China slowed from a 7.6% year-on-year clip in April to 6.5% for March (consensus: 7.0%), with softness in overseas demand and domestic consumption the chief factors, according to Julian Evans-Pritchard at Capital Economics.

However, production of steel, cement and glass all rose further, suggesting that construction was holding up for the moment, the same research house said.

Electricity production on the other hand fell "noticeably", Capital Economics said, apparently indicating that manufacturing output bore the brunt of the slowdown.

The year-to-date pace of fixed investment also slowed, with the data revealing an expansion of 8.9%, down from 9.2% over the first quarter (consensus: 9.1%), although a fall in capital goods inflation was thought to have played a hand.

"In real terms, the slowdown last month was more moderate. But the bigger picture is that investment growth remains considerably weaker in real terms than a glance at the headline nominal data would suggest," Capital Economics said.

Retail sales growth also cooled, rising at a 10.7% year-on-year pace last month which was down from 10.9% (consensus: 10.8%), amid lower sales of cars, white goods and renovation materials.

"The upshot is that slowing domestic consumption growth and softer external demand appear to have driven the slowdown in China at the start of Q2. For now at least, infrastructure and property investment are holding up, helping to stave off a sharper deceleration. But we doubt the current strength in these areas can be sustained given that policy is being tightened and the property market is starting to cool," Capital Economics said.