China’s two most-watched economic indicators, industrial output and retail sales, both declined in April, confirming what many traders already suspected: the post-Covid recovery has run out of steam.

The numbers tell a familiar story

Industrial production has been on a downward trajectory for months. In August, output rose just 5.2% year-on-year, already below expectations.

Retail sales paint an even grimmer picture. Growth hit just 1.3% year-on-year in November, a figure that would be alarming for any major economy but is especially stark for China, where domestic consumption was supposed to be the engine replacing export-led growth.

The Manufacturing Purchasing Managers’ Index, or PMI, sat at 49.2 in November. Anything below 50 signals contraction. Chinese factories were shrinking, not growing. The one silver lining was that production expectations ticked up to 53.1, suggesting manufacturers expected things to improve.

In the first 11 months of the year, sales of newly built commercial properties fell 7.8% year-on-year. China’s property sector accounts for roughly a quarter of GDP when you include related industries.

Strong supply, weak demand

NBS Chief Economist Fu Linghui pointed to “operational difficulties among enterprises” and instability caused by external factors. The NBS framed the core issue as “strong supply, weak demand.” Chinese factories can produce plenty of goods. The trouble is finding people willing to buy them, both domestically and abroad.

The 1.3% retail sales growth in November came despite stimulus measures including rate cuts, property support policies, and consumer discount programs, not in the absence of them.