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China’s economy growth missed expectation in the second quarter as demand weakened at home and abroad, with the post-COVID recovery faltering rapidly and raising pressure on policymakers to roll out stimulus to shore up the economy.
The GDP expanded 6.3% year over year in the second quarter, data released by the National Bureau of Statistics showed on Monday, accelerating from 4.5% in the first three months of the year, but well below the forecast for growth of 7.3% in a Reuter’s poll, though it’s the fastest pace since the second quarter of 2021
The economy expanded by 0.8% in the quarter from the previous quarter, on a seasonally adjusted basis, showed the data, versus analysts’ expectations for a 0.5% growth and compared with a 2.2% expansion in the first quarter.
China’s GDP expanded by 5.5% year over year in the first half of 2023, one percentage point faster than the first quarter, compared to the country’s full-year growth target of “around 5%”.
Data from the NBS also showed that China’s retail sales grew 3.1% in June from a year earlier, slowing sharply from a 12.7% jump in the previous month and the 3.2% growth expected by analysts in a Reuters poll.
Industrial output growth unexpectedly quickened to 4.4% last month from 3.5% in the previous month, but demand remains lukewarm.
Fixed-asset investment shrank 0.2% in the first six months, a sharp contrast to the 8.1% growth in investment by state entities, suggesting weak private business confidence.
Recent data showed a rapidly faltering post-COVID recovery as exports declined the most in three years due to cooling demand at home and abroad while a prolonged downturn in the key property market has sapped confidence. The weak overall momentum and global recession risks have raised expectations policymakers will need to do more to shore up the world’s second-biggest economy.
JPMorgan cut China’s 2023 GDP growth forecast to 5% from 5.5% after the NBS data release.
The bank also tempered the outlook on the property industry, saying there is no turnaround in sight yet. The biggest cuts were in new constructions, with the bank now expecting a contraction of 20% this year, compared to 7% decline in its earlier projection.
The bank expects more policy stimulus including a 10 basis point policy rate cut in the fourth quarter, and nationwide housing policy easing, including a relaxation of down-payment requirements.