Industrial output in China just beat expectations—but investors aren't celebrating yet. Factories posted a solid 6.1% year-on-year growth in April, surprising to the upside despite trade war aftershocks. But consumer spending? That's where the story softens. Retail sales came in weaker than expected at 5.1%, and car sales—typically a reliable growth driver—barely moved. Even with subsidies in play, Chinese households are still hesitant to open their wallets, pointing to broader issues with wage growth, job security, and ongoing deflationary pressure.
The property market remains a drag. Investment in real estate continues to fall, home prices are slipping faster, and household savings are hitting record highs as consumers shift more cash into time deposits. That's not a great sign for domestic demand. Infrastructure is holding up thanks to government bond issuance, but manufacturing investment is beginning to look shaky. Trade may have gotten a temporary breather from the 90-day US tariff pause, but uncertainty around the next phase could still weigh on corporate planning. Exporters have been rerouting shipments to Southeast Asia and Europe—but that workaround has its limits.
Even so, the resilience in China's factory data has prompted analysts at Nomura, Goldman Sachs, and JPMorgan to raise their 2025 growth forecasts to around 4.5%. That's still shy of Beijing's 5% target. For companies like Tesla (TSLA, Financial) and others deeply tied to China's economic health, the picture remains nuanced: production is holding up, but without a real revival in consumer confidence, the runway for sustainable growth could be shorter than hoped. The next few months—especially with policymakers hinting at more support—could be critical in setting the tone for the rest of the year.
