China’s economic growth more than halved in the second quarter from a record expansion in the first three months of the year, 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-June quarter from a year earlier, official data showed on Thursday, 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-March period, when the year-on-year growth rate was heavily skewed by the COVID-induced slump in the first quarter of 2020.
June activity data slowed from the month before but beat expectations.
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 suggest 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.
With growth softening, investors are watching to see if the central bank is shifting to an easier policy stance after the People’s Bank of China announced last week it would cut the amount of cash that banks must hold as reserves. The move released about 1 trillion yuan ($US154.64 billion) in long-term liquidity to bolster the recovery.
On a quarterly basis, GDP expanded 1.3 per cent in the April-June period, the National Bureau of Statistics said, just beating expectations for a 1.2 per cent rise in the Reuters poll.
The economy grew a revised 0.4 per cent in the first quarter from the fourth quarter last year.
The NBS data also showed 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 a 11.0 per cent increase after May’s 12.4 per cent rise.
Data earlier this week showed China’s exports grew much faster than expected in June, but a customs official said overall trade growth may slow in the second half of 2021, partly reflecting COVID-19 pandemic uncertainties.
Economists in the Reuters poll expected a 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 for growth higher than 6 per cent. China was the only major economy to have avoided 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 (RRR) 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 January-May.