Production at China’s factories is growing for the first time since the coronavirus pandemic began. But there are still major challenges ahead for the country’s economy. Industrial output increased 3.9% in April from a year ago, according to data released Friday by the National Bureau of Statistics. That’s well above the 1.5% uptick that analysts polled by Refinitiv expected, and the first time output has grown since December. China has been slowly trying to return to normal after large swaths of the economy were shut down for weeks earlier this year. The growth detailed on Friday can be attributed to the political pressure that Beijing is putting on factories to resume production, Julian Evans-Pritchard, senior China economist for Capital Economics, wrote in a research note on Friday. He expects factory output to continue to grow, since policymakers in China have signaled that more stimulus measures are on the way. But it wasn’t all good news on Friday for the world’s second largest economy. Domestic demand remains very weak: Retail sales in China dropped 7.5% in April from a year earlier. And the official unemployment rate — which tracks jobless numbers in urban areas — reached 6%, up from 5.9% in March and just shy of February’s record of 6.2%. Evans-Pritchard said that the true unemployment rate is “likely double” what was announced Friday, since the urban rate does not include people in rural communities or a large number of the 290 million migrant workers who work in China. “We need to fully assess the risks and challenges” of the pandemic, said Liu Aihua, a spokeswoman for the NBS, at a press conference in Beijing on Friday. She said that as the virus ravages the rest of the world, China will continue to be affected, too. China’s economy shrank 6.8% in the first three months of 2020 compared to a year earlier, amounting to about 693 billion yuan ($98 billion) in lost output. While the International Monetary Fund still expects China’s GDP to grow 1.2% this year, analysts warn that the country’s recovery will be drawn out. The country’s recovery “continues but remains highly uneven,” Evans-Pritchard wrote, adding that the sectors of China’s economy that are driven by consumers are still struggling. The plunge in retail sales, for example, reflects a “continued strain on household finances,” he said. There are also some fears that China could experience another wave of virus cases. The country has reported four new confirmed cases in the past 24 hours, according to China’s National Health Commission. There were also 11 new asymptomatic cases nationwide. (The country counts those separately from symptomatic cases. Two of those cases were imported.) Beijing may announce more economic news late next week, when the country holds its annual parliament meeting after a two-month delay. The government has still not announced a GDP growth target for this year. Analysts expect measures aimed at keeping employment stable will be a key priority at that meeting. “So far, there are many local subsidies for wages and factories to keep hiring stable. But it is obvious that this is not going to be enough,” said Iris Pang, economist for Greater China at ING.