Chinese economy grows slower than expected in second quarter
BEIJING: China’s economy grew more slowly than expected in the second quarter as slowing manufacturing activity, rising raw material costs and new COVID-19 outbreaks weighed on the momentum of the recovery.
Gross domestic product (GDP) grew 7.9% in the April-June quarter from a year earlier, official data showed on Thursday, missing expectations of an 8.1% increase in a Reuters poll of economists.
Growth slowed considerably from a record expansion of 18.3% during the January-March period, when the year-on-year growth rate was heavily skewed by the COVID-induced crisis in the first quarter of 2020.
June activity data slowed from the previous month but exceeded expectations.
“The numbers were slightly lower than our expectations and market expectations (but) I think the momentum is pretty strong,” said UOB economist Woei Chen Ho in Singapore.
“Our biggest concern is the patchy recovery we have seen so far and for China the recovery in domestic consumption is very important… this month’s retail sales have been pretty strong and that may allay some concerns. “
As the world’s second-largest economy has rebounded strongly from the COVID-19 crisis, bolstered by strong export demand and political support, data in recent months suggests some slowing down. Higher raw material costs, supply shortages and pollution controls weigh on industrial activity, while small outbreaks of COVID-19 have limited consumer spending.
Investors are watching to see if the central bank adopts a looser policy after the People’s Bank of China announced last week that it would reduce the amount of cash banks must hold as reserves.
The move freed up around 1 trillion yuan ($ 154.64 billion) in long-term liquidity to support the recovery and came even as policymakers sought to normalize their policies after the economy rebounded strongly after the coronavirus crisis to contain financial risks.
On a quarterly basis, GDP grew 1.3% in the April-June period, the National Bureau of Statistics said, narrowly exceeding expectations of a 1.2% increase in the Reuters poll. The SNB revised downward growth in the first quarter from the fourth quarter of last year to 0.4%.
NBS data also showed that China’s industrial production rose 8.3% in June from a year ago, slowing from an 8.8% increase in May. Economists in the poll were expecting a 7.8% increase year-on-year.
Retail sales increased 12.1 percent from a year earlier in June. Analysts in the poll were expecting an 11.0% increase after rising 12.4% in May.
“The national economic recovery is uneven,” Liu Aihua, an NBS official said at a briefing Thursday.
“We also have to see that the global epidemic continues to evolve, and that there are many external instabilities and uncertain factors,” she said.
Data earlier this week showed that China’s exports grew much faster than expected in June, but a customs official said overall trade growth could slow in the second half of 2021, partly reflecting uncertainties associated with it. to the COVID-19 pandemic.
READ: China’s export growth in June beats expectations as global lockdowns easing stimulates demand
Reuters poll economists expected 8.6% GDP growth in 2021, which would be the highest annual growth in a decade and well above the country’s official target for growth above 6% . China was the only major economy to avoid a contraction last year, growing 2.3%.
Premier Li Keqiang reiterated Monday that China will not resort to flood-like stimulus measures.
Still, Reuters poll economists expected more support this year, predicting a further decline in banks’ reserve requirement ratio (RRR) in the fourth quarter.
Capital investment rose 12.6% in the first six months compared to the same period a year earlier, compared to an expected rise and fall of 12.1% from a jump of 15.4% in January-May.