China’s economy showed further signs of weakness in the second quarter as data Monday revealed growth missed expectations and consumers remained cautious, adding pressure on leaders to unveil further stimulus.
The disappointing figures follow a string of below-par readings in recent months indicating the post-Covid recovery was already going off the rails and highlighting the tough work authorities face reviving momentum.
The National Statistics Bureau said the world’s number two economy grew 6.3 percent on-year in April-June, faster than the previous three months but much weaker than the 7.1 percent predicted in an AFP survey of analysts.
That came despite having a very low base of comparison with last year when the country was hit by a series of Covid lockdowns in major cities.
In quarter-on-quarter terms — considered a more realistic basis for comparison — growth came in at 0.8 percent, well down from the 2.2 percent seen in January-March, the first full period after the removal of zero-Covid restrictions.
NBS spokesman Fu Linghui said in a statement that the economy “showed a good momentum of recovery”.
“Market demand gradually recovered, production supply continued to increase, employment and price were generally stable, and residents income grew steadily,” he added.
But Fu admitted at a Monday news conference the Chinese economy faces “a complex and difficult international situation, and arduous tasks for reform, development and ensuring stability”.
Additional data reinforced the view that the post-pandemic recovery was petering out.
Retail sales, a key gauge of consumption, edged up 3.1 percent in June from a year earlier, according to the NBS, slowing from the 12.7 percent rise in May.
It was in line with expectations of analysts polled by Bloomberg, but signalled shaky consumer confidence.
– ‘Serious deterioration’ –
“Consumption remains a driving force for the economic recovery,” Erin Xin, Greater China Economist at HSBC, told AFP.
“In some areas, particularly in services, the revival has been particularly strong,” she said, adding that consumption levels had not recovered to pre-pandemic levels.
Unemployment among Chinese youth also jumped to a record 21.3 percent in June, up from 20.8 percent in May, the NBS said.
The general unemployment figure stayed at 5.2 percent, but only takes into account the big cities.
The run of poor readings over recent months has ramped up calls for officials to unveil support measures.
While the People’s Bank of China last month cut interest rates and authorities pledged to help the troubled property sector, there has been very little concrete action out of Beijing.
Low demand means companies are hesitating to hire, taking a “wait-and-see” attitude before expanding operations, said Harry Murphy Cruise, an economist at ratings agency Moody’s.
“Unfortunately… a revival in business activity is needed for broader demand to lift,” he added.
“That stalemate is keeping business activity weak.”
And given the slow growth, some analysts now expect support measures to be unveiled at a quarterly meeting of China’s Politburo — the top-decision making body of the ruling Communist Party — this month.
“Given the disappointing performance in the second quarter, the quarterly Politburo meeting at the end of July would set a more pro-growth policy tone,” analysts at Macquarie wrote in a note.
“Indeed, we expect more easing measures to be announced in the weeks ahead, not like a bazooka but in batches,” they added.
Last year, GDP expanded 3.0 percent, well below the official target of 5.5 percent.
And China is aiming for about five percent growth this year, one of the lowest targets set by the Asian giant in decades and one that Premier Li Qiang has warned will not be easy to achieve.
We must “be psychologically prepared to see other signs of serious deterioration in the Chinese economy”, analysts from US-based firm SinoInsider said.
“We expect more (targeted) easing measures in coming months, with a focus on fiscal, housing and consumption, although the magnitude of stimulus should be smaller than in previous easing cycles,” analysts from Goldman Sachs said in a note.