Economic activity weakened across the board in April; the Q1 rebound may not last

Overview

This report assesses China’s main economic activity data for April 2026. Nomura notes that the data were broadly below expectations: industrial production, retail sales, and fixed asset investment slowed simultaneously, while the contraction in real estate deepened again. The report argues that the reflation seen in earlier months was driven more by external shocks and price factors than by an underlying improvement in domestic demand; the AI boom and the stock-market rally are not enough to offset the economic pressure from the property downturn.

Core views

The core view is that China’s Q1 economic rebound may have been only a temporary phenomenon. The slowdown in industrial production partly reflects distortions in nominal export growth caused by higher chip and electronic product prices, rather than genuinely strong production demand. The decline in retail sales shows that household purchasing power and consumer confidence remain weak, with home appliances, autos, petroleum products, communications equipment, and office equipment all under pressure. Fixed asset investment turned negative again, indicating stress across manufacturing, infrastructure, and property. In real estate, new-home sales, investment, and funding sources remain weak, and improvements in the secondary market in a few first-tier cities have only limited spillover to the national new-home market.

Analysis framework

The report uses a monthly macro data-tracking framework, comparing NBS industrial production, retail sales, fixed asset investment, real estate, and housing-price data with market consensus, Nomura forecasts, and prior-month and Q1 performance. It also explains the changes by combining export prices, working days, the trade-in policy, the anti-involution policy, the pace of special local government bond issuance, and leading indicators of housing prices.

Methodology notes

• macroeconomic data trackingMonthly economic activity indicator comparison

  Compare industrial production, retail sales, fixed asset investment, and real estate indicators with market expectations and historical ranges to assess changes in growth momentum.

  The report focuses on y/y growth rates, q/q momentum, differences between nominal and real measures, and structural changes by sector and city tier.

• policy and demand analysisAssessment of domestic demand and policy constraints

  Judge the strength of domestic demand and the need for policy support through performance in consumption, investment, real estate, and credit-related data.

  Nomura believes weak domestic demand explains why the renminbi should not appreciate too quickly, why credit demand is subdued, and why 10-year Chinese government bond yields are declining.

• real estate cycle analysisObservation of divergence between new-home and secondary-home markets

  Differentiate between new-home sales, secondary-home prices, and the performance of first-tier versus lower-tier cities to assess whether the property adjustment has truly stabilized.

  The report argues that the improvement in secondary-home markets in first-tier cities, especially Shanghai, has limited significance for the national new-home market and most secondary-home markets.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• renminbi

  Weak domestic demand limits room for overly rapid appreciation

  Strengths

  External demand and higher prices for some exports still provide some support.

  Weaknesses

  Weaker domestic demand, insufficient credit demand, and the property downturn are weighing on macro fundamentals.

  Comparison

  The report emphasizes that the divergence between external and domestic demand explains why Beijing does not want to allow the renminbi to appreciate too quickly.

  Risks

  If policy easing is insufficient or the property downturn continues, fundamental support for the renminbi could weaken further.

• 10-year Chinese government bonds

  Weak growth and weak credit demand are supportive for lower bond yields

  Strengths

  Without any policy rate cuts, the 10-year Chinese government bond yield has already fallen by about 10 bp year to date, reflecting market concern about growth momentum.

  Weaknesses

  If stabilization policies are clearly stepped up, yields could face upward pressure.

  Comparison

  Bond market performance contrasts with the rise in equity indices and the AI boom.

  Risks

  Policy stimulus, increased supply, or unexpected inflation could push yields higher.

• Chinese equity indices

  Macro data provide a fundamental test for the stock-market rebound

  Strengths

  The AI boom and earlier gains in equity indices improved risk appetite.

  Weaknesses

  The report believes the AI boom is not enough to help China escape the economic difficulties caused by the property downturn.

  Comparison

  Improved stock-market sentiment coexists with weak industrial, consumption, and investment data.

  Risks

  If earnings expectations are revised down again, the earlier rebound could come under pressure.

• Property chain

  Still the main drag on the economy

  Strengths

  There are signs of localized improvement in the secondary-home market in first-tier cities, especially Shanghai.

  Weaknesses

  Property investment, new-home sales, new starts, and funding sources are all deeply negative.

  Comparison

  Localized improvement in the secondary market has limited spillover to the new-home market and most cities.

  Risks

  If the property contraction deepens further, it will drag on investment, consumer confidence, and local government finances.

• Crude oil and petroleum products

  Price increases weigh on consumption, while supply disruptions affect refining

  Strengths

  Rising global oil prices may support upstream pricing.

  Weaknesses

  Retail sales of petroleum products turned to -6.5% y/y in April, while crude oil refining volume fell to -5.8% y/y.

  Comparison

  The energy price shock is pressuring both the consumer side and the refining side.

  Risks

  Tensions in the Middle East and further oil-price gains could weaken household purchasing power further.

• Automobile and EV supply chain

  Weak domestic demand is dragging on sales and investment

  Strengths

  Exports still show some resilience, and investment in some electrical machinery and equipment has recovered.

  Weaknesses

  Automobile sales value was -15.3% y/y, passenger vehicle sales were -20.0% y/y, automobile output was -2.6% y/y, and investment in the motor-vehicle industry was -10.4% y/y.

  Comparison

  Strong exports failed to offset the deep contraction in domestic sales.

  Risks

  Price wars, the anti-involution policy, and insufficient demand may continue to suppress industry investment.

Key data

• Industrial production4.1% y/y in April 20265.7% in March, 6.0% market consensus, 5.2% Nomura forecast.
• Retail sales0.2% y/y in April 20261.7% in March, 2.0% for both market consensus and Nomura forecast; real retail sales were -1.0% y/y.
• Fixed asset investment-8.0% y/y in April 20261.6% in March, 1.7% market consensus, 2.0% Nomura forecast.
• Manufacturing investment-4.3% y/y in April 20264.9% in March; the anti-involution policy may continue to restrain capacity expansion.
• Infrastructure investment-3.7% y/y in April 20268.9% in March; slower issuance of special local government bonds than in the same period last year may be one reason.
• Property investment-20.1% y/y in April 2026 -11.3% in March, significantly weaker than the -12.3% market consensus and Nomura’s -11.1% forecast.
• New-home sales area-9.5% y/y in April 2026-7.5% in March, showing that the new-home market remains under pressure.
• Existing-home prices-0.23% m/m in April 2026-0.24% in March; the trend toward a narrower decline paused, with 12 of 70 cities rising m/m, fewer than 13 in March.
• Q2 GDP forecastNomura forecast 4.1%Below the market consensus of 4.7%.
• Crude oil refining volume-5.8% y/y in April 2026-2.2% in March; the report says supply disruptions caused by tensions in the Middle East weighed on crude oil refining.

Impact & implications

The report implies that pricing of China macro assets still needs to focus on weak domestic demand rather than only nominal export growth, the AI theme, and the stock-market rebound. The weaker data support a more cautious growth assessment and suggest that policy makers may need to intensify efforts to stabilize growth. Rapid renminbi appreciation is constrained by domestic-demand divergence; lower Chinese government bond yields are consistent with weak credit demand; and commodities, autos, the property chain, and consumer electronics all face the combined impact of insufficient demand and price shocks.

Risks

• The property downturn deepens further, weighing on investment, consumer confidence, and local government finances.
• Household purchasing power and willingness to consume remain weak, causing retail sales to fall further into negative territory.
• The anti-involution policy continues to constrain manufacturing investment and some capacity expansion.
• The slower pace of special local government bond issuance may limit the recovery in infrastructure investment.
• Rising energy, chip, and electronic-product prices may suppress end-demand.
• If market consensus remains too optimistic, subsequent growth forecasts may face downside revisions.

What to watch

• Whether the May 2026 industrial production, retail sales, and fixed asset investment data continue the weakness seen in April.
• Whether property investment, new-home sales, secondary-home prices, and the Iceberg index deteriorate further.
• Whether Beijing steps up policy support to stabilize growth, especially fiscal, property, and consumption-stimulus measures.
• The pace of special local government bond issuance and its transmission to infrastructure investment.
• The reaction of the renminbi exchange rate, credit demand, and the 10-year Chinese government bond yield to the weak data.
• Whether consumption of autos, home appliances, communications equipment, and office equipment recovers from the impact of the fading trade-in policy.