China’s GDP growth misses expectations in the second quarter

While China’s exports rose more-than-expected in June, imports grew far less than expected. Workers pictured here disinfect a container ship terminal in Qingdao on July 13, 2022.

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BEIJING — China posted 0.4% year-on-year GDP growth in the second quarter, missing expectations as the economy struggled to shake off the impact of Covid controls.

Analysts polled by Reuters had forecast growth of 1% for the second quarter.

Industrial production also missed expectations in June, rising 3.9% yoy versus 4.1% forecast.

However, retail sales rose 3.1% in June, recovering from an earlier slump and beating expectations for no year-on-year growth. Major e-commerce companies held a promotional shopping festival in the middle of last month.

Retail sales in June were boosted by spending across many categories including autos, cosmetics and medicine. However, gastronomy, furniture and building materials recorded declines. Within retail sales, online sales of physical goods rose 8.3% year over year in June, slower than the previous month’s 14% growth.

Fixed investment for the first half of the year beat expectations, rising 6.1% versus 6% forecast.

Total fixed asset investment rebounded on a monthly basis, 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, investment in real estate deteriorated. Investments in real estate fell 5.4% year over year in the first half, worse than the 4% decline in the first five months of the year.

Unemployment in China’s 31 largest cities fell to 5.8% in June from pre-pandemic highs, but unemployment among the 16-24 age group rose further to 19.3%.

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The statistics office described recent economic results as “hard-earned achievements” but warned of the “ongoing” impact of Covid and “shrinking demand” at home. The bureau also noted the rising “risk of stagflation in the global economy” and tightening of monetary policy overseas.

In the second quarter, mainland China faced its worst Covid outbreak since the pandemic peaked in early 2020. The metropolis of Shanghai was hit by strict house bans for about two months, while travel restrictions contributed to supply chain disruptions.

By early June, Shanghai, Beijing and other parts of China were on track to resume normal business operations. In recent weeks, the central government has reduced quarantine times and relaxed some Covid prevention measures.

But different parts of China have had to reintroduce Covid controls as new cases surged.

On Monday, Nomura said regions that account for 25.5% of China’s GDP were under some form of lockdown or tightened controls. That’s up from 14.9% a week earlier.

Major investment banks have repeatedly lowered their full-year GDP targets in China due to the impact of Covid controls. Among the companies tracked by CNBC, the median forecast at the end of June was 3.4%.

The official GDP target of “around 5.5%” was announced in early March.

This is breaking news. Please check back for updates. China’s GDP growth misses expectations in the second quarter

Joshua Buckhalter

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