China’s economic data for May disappointed, with growth in industrial output and retail sales slowing from April and youth unemployment hitting a record high.
The uneven recovery after the reopening has weighed on the oil market, which fears a slowdown in Chinese demand. But the International Energy Agency (IEA) continues to be increasingly optimistic on China, saying in its latest monthly report published on Wednesday that “China’s rebound continues unabated, with its oil demand reaching an all-time high of 16.3 mb/d in April.”
The IEA raised its global oil demand forecast for this year, expecting demand growth of 2.4 million barrels per day (bpd) in 2023 to 102.3 million bpd, a new record. This latest global oil demand growth estimate is higher than last month’s projection of 2.2 million bpd demand growth to 102 million bpd.
“Global oil demand continues to defy the challenging macroeconomic climate,” the IEA said in its latest report, adding that China is expected to account for 60% of the demand gains this year. Soaring transport and petrochemical use propelled China’s apparent demand in April to an all-time high of 16.3 million bpd, the agency noted.
Despite these projections, the economy is not recovering as smoothly as initially expected. Retail sales rose by 12.7% year on year in May, but slowed by 5.7 percentage points from April, the National Bureau of Statistics of China said on Thursday. Industrial output increased by 3.5% annually in May, slower than the 5.6% growth in April. In addition, unemployment among people aged 16 to 24 hit an all-time high of 20.8%, the Chinese data showed.
“The domestic structural adjustment has mounting pressure, and the foundation for the economic recovery is not yet solid,” the statistics bureau said.
The recent weaker-than-expected economic data will likely lead to additional easing policies and broader stimulus to boost the economy, analysts say.
The Chinese central bank earlier this week cut a key short-term lending rate for the first time in 10 months, and on Thursday cut its key medium-term lending rate, signaling it wants to spur the economic recovery. The world’s top crude oil importer is also considering a broad stimulus package to prop up the economy, sources with knowledge of the plans told Bloomberg on Tuesday.