China’s economic activity broadly weakened in April, raising the risk of slower growth in Q2

Overview

This report evaluates China’s economic activity data for April 2026. Goldman Sachs notes that April data were broadly weaker than expected, with industrial production, fixed asset investment, retail sales, and services output all slowing versus March. The report attributes part of the pressure to the global energy supply shock, softer credit demand, and heavy rainfall in southern China that affected outdoor construction, and argues that these data reinforce the view that Q2 economic growth will slow from Q1.

Core views

The core view is that China’s economic momentum clearly cooled in April. Industrial production still had export support, but slower chemical and electrical machinery output dragged on the overall pace; fixed asset investment weakened broadly, with real estate still the weakest link; on the consumption side, goods retail and catering revenue both softened, while services growth remained materially stronger than retail sales, indicating that services consumption continued to outperform goods consumption. Goldman Sachs expects China’s Q2 real GDP growth to slow from 5.0% yoy in Q1 to 4.7% yoy, and the annualized quarter-on-quarter pace to decelerate from 5.3% to 4.0%.

Analysis framework

The report uses a macro data tracking framework, comparing April industrial production, fixed asset investment, retail sales, services output, real estate activity, and employment data with March readings, Goldman Sachs forecasts, and market consensus, while also incorporating seasonally adjusted month-on-month estimates, sector sub-item analysis, and charts to assess changes in economic momentum.

Methodology notes

• Macro data surpriseAsia-MAP scores

  Measure how much each data sub-component deviates from expectations using sub-score analysis.

  The report lists Asia-MAP scores for industrial production, fixed asset investment, and retail sales, showing that the main economic activity indicators were weaker than expected to varying degrees in April.

• Seasonal adjustmentGS seasonal adjustment estimates

  Observe monthly momentum through Goldman Sachs’ own seasonally adjusted estimates.

  The report repeatedly uses Goldman Sachs’ estimated seasonally adjusted non-annualized month-on-month data to complement the year-on-year figures, and notes that some official seasonally adjusted series are sensitive to methodology choices.

• Sub-component attributionSector contribution analysis

  Explain the source of aggregate changes through industry and product-level sub-components.

  The report attributes the slowdown in industrial production to drags from chemicals and electrical machinery, while noting that computers and other equipment, automobiles, and electricity and heat provided partial support.

Asset mapping & comparison

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

• China macroeconomy

  Direct research object

  Strengths

  Services growth remained above retail sales, and the employment rate data showed some surface improvement.

  Weaknesses

  Industrial production, fixed asset investment, retail sales, and services output all slowed versus March, with overall data broadly weaker than expected.

  Comparison

  Q2 annualized quarter-on-quarter growth is expected to slow from 5.3% in Q1 to 4.0%.

  Risks

  Persistent energy supply-chain disruptions, insufficient domestic policy offset, and uncertainty in data reliability.

• Real estate chain

  Main drag

  Strengths

  The year-on-year decline in completions narrowed slightly from March.

  Weaknesses

  Sales area, new starts, floor space under construction, and real estate investment all remain in negative growth territory, with declines in new starts and investment widening.

  Comparison

  Real estate investment fell from -11.3% yoy in March to -20.1% yoy in April.

  Risks

  Continued pressure on home prices, no substantive improvement in sales, and ongoing contraction in developer investment.

• Industry and manufacturing

  Growth momentum monitor

  Strengths

  Sub-components such as computers and other equipment, power generation, crude steel, and cement output improved to varying degrees versus March.

  Weaknesses

  Chemicals and electrical machinery weighed on industrial production, while the growth rates for automobiles, computers, and industrial robots also slowed.

  Comparison

  Industrial production growth slowed from 5.7% yoy in March to 4.1% yoy in April.

  Risks

  Global supply-chain disruptions, energy shocks, and external-demand volatility affecting production.

• Consumption and retail

  Domestic demand monitor

  Strengths

  Services consumption continued to outperform goods consumption.

  Weaknesses

  Goods sales, catering revenue, home appliances, automobiles, and petroleum product sales all weakened.

  Comparison

  Retail sales growth slowed from 1.7% yoy in March to 0.2% yoy in April.

  Risks

  Persistent weak domestic demand, pressure in youth employment, and the potential impact of AI adoption on entry-level white-collar jobs.

Key data

• Industrial production+4.1% yoyApril growth was below Goldman Sachs’ forecast of +6.2% and the Bloomberg consensus of +6.0%; March was +5.7%.
• Fixed asset investment-1.6% ytd yoy；monthly -8.2% yoyYear-to-date year-on-year growth turned negative in April from +1.7% in March, while the monthly year-on-year reading fell from +1.6% in March to -8.2%.
• Retail sales+0.2% yoyApril year-on-year growth was below Goldman Sachs’ forecast and the consensus expectation of +2.0%; March was +1.7%.
• Services production index+4.3% yoyApril year-on-year growth slowed from +5.0% in March, but remained above retail sales growth.
• National urban surveyed unemployment rate5.2%The unadjusted unemployment rate fell from 5.4% in March; Goldman Sachs estimates the seasonally adjusted rate at about 5.3%.
• Surveyed unemployment rate in 31 major cities5.2%It edged down from 5.3% in March; Goldman Sachs estimates the seasonally adjusted rate was broadly unchanged at 5.2%.
• Real estate sales area-9.5% yoyThe decline widened from -7.5% in March; sales value was -7.7% yoy.
• New starts area-26.6% yoyThe decline widened significantly from -17.4% in March.
• Real estate investment-20.1% yoyThe decline widened from -11.3% in March.
• Goldman Sachs Q2 GDP forecast+4.7% yoy；+4.0% qoq annualizedGoldman Sachs expects Q2 growth to be lower than Q1’s +5.0% yoy, and the annualized quarter-on-quarter pace to be below Q1’s +5.3%.

Impact & implications

The April data indicate that China’s near-term economic momentum has weakened, with investment and goods consumption under clearer pressure. For asset pricing, slower macro growth may weigh on sentiment for cyclical names, the real estate chain, and domestic-demand-sensitive sectors, while continued energy supply-chain disruptions could further increase downside risks to earnings and growth forecasts. The report also implies that, absent meaningful domestic policy offset, growth faces downside risk in Q2.

Risks

• Continued global energy supply-chain disruptions could further weigh on production and demand.
• A lack of meaningful domestic policy offset could raise downside risk to Q2 growth.
• Fixed asset investment data may be affected by statistical revisions, creating uncertainty in short-term volatility and comparability.
• Ongoing declines in real estate sales, investment, and new starts could weigh on related industries.
• Youth employment pressure may be understated by changes in statistical methodology.

What to watch

• The recovery in chemical, electrical machinery, computer equipment, and automobile output in industrial production.
• Marginal changes in credit demand and in infrastructure, manufacturing, and real estate investment.
• Whether real estate sales area, sales value, new starts, and home prices continue to weaken.
• The pace of recovery in automobile, home appliance, petroleum product, and catering sales within retail sales.
• Whether energy supply-chain disruptions persist and whether stronger domestic policy offset emerges.
• Whether Q2 GDP quarter-on-quarter and year-on-year readings match Goldman Sachs’ slowdown forecast.