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China’s GDP disappoints estimates and grows 0.4% in the 2nd quarter on an annual basis, with the impact of lockdowns

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China’s economic growth slowed sharply in the second quarter, up 0.4% from a year earlier and below expectations, official data showed on Friday, as widespread lockdowns to contain record cases of Covid-19 cases hit industrial activity and consumer spending.

Gross domestic product (GDP) was forecast to expand 1.0% in the April-June quarter from a year earlier, according to a Reuters poll of analysts, slowing significantly from 4.8% in the first quarter.

On a quarterly basis, GDP fell 2.6% in the second quarter, compared with expectations for a decline of 1.5% and a revised gain of 1.4% in the previous quarter. In the first half, GDP grew by 2.5%.

Full or partial lockdowns were imposed on the country’s main centers in March and April, including the commercial capital Shanghai.

While many of these restrictions have been lifted and the June data showed signs of improvement, analysts do not expect a quick economic recovery. China is sticking to its tough zero Covid policy amid new outbreaks, the country’s housing market is in a deep slump and the global outlook is dimming.

A Reuters poll predicts China’s growth will slow to 4.0% in 2022, far below the official growth target of around 5.5%.

Industry, retail and real estate

Already among the June activity data released this Friday pointed to a 3.9% increase in China’s industrial production in June compared to the previous year, albeit below the 4.1% forecast by analysts.

However, retail sales in June were up 3.1%, rebounding from a previous slump and beating expectations of no year-over-year growth. Major e-commerce companies held a series of promotional shopping events in the middle of last month.

June retail sales saw an increase in spending in many categories, including automobiles, cosmetics and medicines. But restoration items, furniture and building materials all saw a decline. In retail sales, online sales of physical goods grew 8.3% year-on-year in June, down from 14% growth in the previous month.

Investment in fixed assets for the first half of the year was slightly above expectations, up 6.1% against the 6% forecast.

Overall fixed asset investment rose monthly, rising 0.95% in June from May to an undisclosed figure. While investment in infrastructure and manufacturing maintained a similar or better pace of growth from May to June, that of the real estate sector worsened. Property investment in the first half of the year dropped 5.4% from a year earlier, worse than the 4% drop in the first five months of the year.

The national survey-based unemployment rate dropped to 5.5% in June (5.9% in May). However, youth unemployment (between 16 and 24 years old) reached a record 19.3% in June, up from 18.4% in May.

In the real estate segment, house prices fell 0.5% year-on-year, down from 0.1% in the previous month.

Real estate investment was down 9.4% in June, down from 7.8% in May, while home sales extended their declines by a further 18.3% last month.

(with Reuters)

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