Better-than-expected exports and China's domestic fuel-pricing controls have helped weather the energy shock, but higher input costs threaten to squeeze already weak factory margins and further dampen consumer spending if the conflict drags on.
Factory output grew 4.1 per cent from a year earlier last month, compared with a 5.7 per cent rise in March, data from the National Bureau of Statistics (NBS) showed on Monday, missing a Reuters poll forecast for 5.9 per cent growth and marking the slowest growth since July 2023.
"The strong performance of the exporters helped to mitigate the weaknesses in domestic demand, but not enough to fully offset it," said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
Exports gathered pace in April as factories raced to meet a wave of orders from AI-related industries and other buyers seeking to stockpile components amid fears the Iran war could push global input costs even higher.
Zhang didn't expect the government to change its policy stance on just one month of weak data and said Beijing will likely reassess its policy stance in July when the second-quarter GDP data is available.
Retail sales, a gauge of consumption, rose just 0.2 per cent in April, cooling sharply from 1.7 per cent in March and sliding to their weakest gain since December 2022. The figures were also well below forecasts centred on a 2 per cent increase.
The fragility of household consumption was underscored in April domestic car sales, which dropped 21.6 per cent in April from a year earlier for their seventh straight month of decline, even as automakers ramped up efforts to expand in overseas markets to offset weakness at home.
"Retail sales growth in the first four months of 2026 points to still-weak household demand, with consumers concentrating spending on selective discretionary and upgrade categories rather than broad-based consumption," said Yuhan Zhang, principal economist at the Conference Board's China Center.
He said the split highlighted a two-speed recovery: steady spending on small lifestyle and tech upgrades, but weak appetite for big-ticket, credit-driven purchases tied to housing and income.
The nationwide survey-based jobless rate nudged down to 5.2 per cent in April from 5.4 per cent in March.
China stocks looked past the weak data and were broadly flat, as investors turned their focus to escalating tensions in the Middle East and a global bond selloff.
The April figures offered early signs that China's first-quarter momentum was already fading and came after US President Donald Trump finished his state visit to China.
The summit delivered few surprises even as it helped ease tense relations between the world's two biggest economies.
China and the United States have agreed to expand agricultural trade through tariff reductions and tackle non-tariff barriers and market access issues, but substantive progress across trade and investment remained elusive.
China's economy expanded 5.0 per cent in the first three months of the year, at the upper end of Beijing's full-year target range of 4.5 per cent to 5.0 per cent.
However, analysts have warned that the recovery is running on uneven ground as industrial output continues to outstrip domestic demand.
