THE country’s economic activity remained strong in the first quarter of the year, with hiring close to a record high, but the outlook is cloudy as two key growth engines — property and commodities — show signs of cooling, a private survey showed yesterday.

While first-quarter revenue looked strong, every sector except manufacturing saw profit growth weaken from late 2017, while investment and cash flow softened, according to the quarterly survey of thousands of Chinese firms by China Beige Book International (CBB).

Weakness in the retail sector is of particular concern, with domestic demand hardly looking robust enough to support growth if China’s exports suffer from punitive U.S. trade measures, CBB added.

“A cloudy 2018 outlook certainly beats a downbeat one, but just a few months ago China′s strong finish to 2017 led most observers to believe that last year′s momentum would carry meaningfully through this year,” CBB wrote in a note discussing its first-quarter findings.

“Still, the pace (of growth) at the end of 2018 will not match the halcyon days of 2017, even without a trade shock or any meaningful deleveraging.”

Defying expectations for a winter lull, Chinese steel companies continued to ramp up output in response to strong sales, and also boosted borrowing, capital expenditures and hiring, the survey showed.

The consensus view had called for a slowdown in production as China cracks down on industrial pollution.

Despite the government’s pledge to continue to reduce excess capacity, the steel sector hiked overall capacity for the eighth straight quarter, CBB said.

“The tougher question is what′s going to drive growth a year from now. Property and commodities both need an extended breather, and it′s difficult to imagine the surprising manufacturing performance of the last two years continuing much longer.”

The retail sector also continues to lag other industries, notably in the form of the biggest quarter-on-quarter decline in sales prices seen for the sector.(SD-Agencies)