China’s second-quarter growth suggests ‘uneven’ economic recovery | Business and Economy News


GDP is expanding by 7.9%, but high raw material costs and supply chain constraints are holding back the momentum.

The Chinese economy grew more slowly than expected in the second quarter, according to official data, as the slowdown in manufacturing activity, higher raw material costs and new outbreaks of COVID-19 weighed on the recovery of the country.

Gross domestic product (GDP) expanded by 7.9% in the April-June quarter compared to the previous year, according to official data shown on Thursday, below expectations of an increase of 8.1% in a survey of economists by the Reuters news agency.

Growth slowed significantly from a record expansion of 18.3% in the January-March period, when the year-on-year growth rate was sharply skewed by the fall induced by COVID-19 in the first quarter of 2020.

June activity data slowed compared to the previous month, but exceeded expectations.

“The figures were marginally below our expectations and market expectations (but) I think the momentum is quite strong,” said Woei Chen Ho, UOB economist, in Singapore.

“Our biggest concern is the uneven recovery we’ve seen so far, and for China, the recovery in domestic consumption is very important … this month’s retail sales were pretty strong and that can allay some concerns “.

While the world’s second largest economy has bounced back strongly from the COVID-19 crisis, driven by strong export demand and policy support, data from recent months suggest some loss of momentum. Higher raw material costs, supply shortages and pollution controls weigh on industrial activity, while small outbreaks of COVID-19 have kept a cap on consumer spending.

Investors are awaiting the latest announcement of central bank policy after the People’s Bank of China said last week that it would reduce the amount of cash banks have to hold as reserves.

The move released about 1 trillion Chinese yuan ($ 154.64 million) into the system to bolster the recovery.

Quarterly, gross domestic product or GDP expanded 1.3 percent during the April-June period, said the National Bureau of Statistics (NBS), which exceeded expectations of an increase in 1.2 percent in the Reuters poll. The NBS revised growth in the first quarter, from the fourth quarter of last year, to 0.4%.

NBS data also showed that China’s industrial production grew 8.3% in June from a year ago, slowing from 8.8% in May. Survey economists had expected a year-on-year increase of 7.8 percent. Retail sales grew 12.1% year-on-year in June. Survey analysts expected an increase of 11.0 percent after the 12.4 percent rise in May.

“The internal economic recovery is uneven,” Niu official Liu Aihua said in a briefing on Thursday.

“We also need to see that the global epidemic continues to evolve and that there are many external instabilities and uncertain factors,” he said.

Earlier this week data showed China’s exports grew much faster than expected in June, but a customs official said global trade growth could slow in the second half of 2021 , partly reflecting the uncertainties of the COVID-19 pandemic.

Reuters survey economists expected GDP growth of 8.6% in 2021, which would be the highest annual growth in ten years and well above the country’s official target for growth of more than 6% . China was the only major economy to avoid a contraction last year, with an expansion of 2.3 percent.

Premier Li Keqiang reiterated on Monday that China would not resort to flood-like stimuli.

However, economists in the Reuters survey expected more support this year and predicted a further cut in the bank reserve ratio (RRR) in the fourth quarter.

Investment in fixed assets grew by 12.6 percent in the first six months over the same period last year, compared to a forecast rise and fall of 12.1 percent from 15.4 percent from January to May.

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