BEIJING (REUTERS) – China’s economy grew more slowly than expected in the second quarter, as slowing manufacturing activity, higher raw material costs and new Covid-19 outbreaks weighed on the recovery momentum.
Gross domestic product (GDP) expanded 7.9 per cent in the April to June quarter from a year earlier, official data showed on Thursday (July 15), missing expectations for a rise of 8.1 per cent in a Reuters poll of economists.
Growth slowed significantly from a record 18.3 per cent expansion in the January to March period, when the year-on-year growth rate was heavily skewed by the Covid-19-induced slump in the first quarter of 2020.
June activity data slowed from the month before, but beat expectations.
“The numbers were marginally below our expectation and the market’s expectation (but) I think the momentum is fairly strong,” said UOB economist Woei Chen Ho in Singapore.
“Our greater concern is the uneven recovery that we’ve seen so far and for China, the recovery in domestic consumption is very important… retail sales this month were fairly strong and that may allay some concerns.”
While the world’s second-largest economy has rebounded strongly from the Covid-19 crisis, buoyed by solid export demand and policy support, data in recent months suggests some loss in momentum.
Higher raw material costs, supply shortages and pollution controls are weighing on industrial activity, while small Covid-19 outbreaks have kept a lid on consumer spending.
Investors are watching to see if the People’s Bank of China is shifting to an easier policy stance after the central bank announced last week it would cut the amount of cash that banks must hold as reserves.
The move released about 1 trillion yuan (S$209 billion) in long-term liquidity to bolster the recovery and came even as policymakers had sought to normalise policy after the economy’s strong rebound from the coronavirus crisis to contain financial risks.
On a quarterly basis, GDP expanded 1.3 per cent in the April to June period, the National Bureau of Statistics (NBS) said, just beating expectations for a 1.2 per cent rise in the Reuters poll. The NBS revised down growth in the first quarter from the fourth quarter of last year to 0.4 per cent.
The NBS data also showed that China’s industrial output grew 8.3 per cent in June from a year ago, slowing from a 8.8 per cent rise in May. Economists in the poll had expected a 7.8 per cent year-on-year rise.
Retail sales grew 12.1 per cent from a year earlier in June. Analysts in the poll had expected an 11 per cent increase after May’s 12.4 per cent rise.
“The domestic economic recovery is uneven,” said NBS official Liu Aihua at a briefing on Thursday.
“We must also see that the global epidemic continues to evolve, and there are many external instabilities and uncertain factors,” she added.
Data earlier this week showed that China’s exports grew much faster than expected in June, but a customs official said overall trade growth may slow down in the second half of 2021, partly reflecting Covid-19 pandemic uncertainties.
Economists in the Reuters poll expected an 8.6 per cent GDP expansion in 2021, which would be the highest annual growth in a decade and well above the country’s official target of more than 6 per cent.
China was the only major economy to avoid a contraction last year, expanding 2.3 per cent.
Premier Li Keqiang reiterated on Monday that China would not resort to flood-like stimulus.
Still, economists in the Reuters poll expected more support this year, forecasting a further cut in the bank reserve requirement ratio in the fourth quarter.
Fixed asset investment grew 12.6 per cent in the first six months from the same period a year earlier, versus a forecast 12.1 per cent uptick and down from a 15.4 per cent jump in the January to May period.