China’s factory output holds amid tariff turmoil, but retail sales and property remain weak

China's factory output in April showed surprising resilience in the face of heightened U.S. tariffs, offering a rare bright spot in a month otherwise marked by sluggish consumer spending and a persistent property sector slump, according to data released Monday by the National Bureau of Statistics.

Industrial production rose 6.1% year-on-year, easing from 7.7% in March but outperforming Reuters’ forecast of 5.5%, signaling that government support measures and fiscal stimulus may be partially offsetting trade tensions.

“April’s resilience is in part a result of ‘frontloaded’ fiscal support,” said Tianchen Xu of the Economist Intelligence Unit, who also cautioned that export delivery values were nearly stagnant despite the headline output gain.

The latest figures follow stronger-than-expected exports earlier this month, as Chinese firms re-routed shipments and overseas buyers rushed to secure supplies ahead of further tariff escalation. However, retail sales—a key barometer of domestic demand—rose just 5.1%, missing expectations and slowing from 5.9% in March, reflecting fragile consumer confidence.

Trade Truce Offers Temporary Relief

A surprise U.S.-China agreement last week to pause new tariffs for 90 days provided a glimmer of relief, slowing what had become a spiraling trade war. Still, U.S. tariffs remain elevated, with 30% duties still in place on many Chinese goods.

“China’s foreign trade has overcome difficulties and maintained steady growth,” said Fu Linghui, spokesperson for the NBS, calling the recent detente a positive development for bilateral trade and global recovery.

Despite this, investor sentiment wavered: the CSI300 Index fell 0.4%, while the Shanghai Composite Index slipped 0.1%. The yuan also weakened slightly against the dollar.

Structural Weaknesses Persist

The property sector—long a pillar of Chinese growth—continues to drag. Home prices have stagnated, and investment is shrinking, underscoring the ongoing difficulties in reviving real estate activity.

In the commodities space, daily crude oil processing dropped 4.9% from March, and crude steel output fell 7%, highlighting weakened industrial demand.

Meanwhile, home appliance sales surged 38.8%, bolstered by a government trade-in scheme aimed at stimulating household consumption—one of the few bright spots on the domestic front.

Unemployment edged down slightly to 5.1%, though anecdotal reports suggest factory job cuts are rising in sectors heavily reliant on U.S. exports.

Economic Outlook: Uneven and Uncertain

Economists remain cautious. Goldman Sachs warned that short-term growth momentum, supported by frontloaded stimulus, may not be sustainable without further policy support. “We believe more easing is necessary to stabilize growth, employment, and sentiment,” its analysts said.

China’s GDP grew 5.4% in Q1, beating expectations and keeping Beijing’s “around 5%” target for 2025 within reach. However, with consumer caution deepening and investment lagging, the path forward remains precarious.

“Even if the tariff rollback proves durable,” said Julian Evans-Pritchard of Capital Economics, “wider headwinds mean we still expect China's economy to slow further over the coming quarters.”

As the trade war’s psychological toll dampens consumer outlook, Beijing faces the dual challenge of sustaining industrial strength while rebuilding domestic confidence in a shifting global economic landscape.

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