Slight recovery in China’s housing market

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May data on house prices and retail sales, two indicators of economic trends, have been released by China’s National Bureau of Statistics (NBS) and both show that the economic stimulus measures being undertaken by the government are still driving the economy in the right direction even though there has been some cooling in the rate of growth.

The modest recovery in China’s housing market in the first five months of this year has supported the economy but the pace of house price increases has started to slow.

NBS statistics show, compared to a month earlier, May house prices in 70 medium and large-sized cities declined in 4, increased in 60 and were flat in the others. Year on year house prices fell in 18 cities and rose in 50.

If house prices continue to ease the government may try on boost home sales in places where sales have been below average or turn to other drivers to boost the economy. Prospects for new home building dampened in the first five months of this year as investment in real estate development increased only slightly and was down year on year.

Moving from an export driven economy

Retail sales now contribute significantly to China's economic growth reflecting government policy to shift from an export-driven. From January to May retail sales of consumer goods in urban areas was up by 10.1% year-onyear and that in rural areas up by 10.9% year-on-year. Online sales in the first five months rose almost 28% year on year with much of this coming from sales to rural households.

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