BEIJING: China is expected to report a sharp slowdown in economic growth in the second quarter after widespread COVID-19 lockdowns jolted factories and consumers, although activity in June may have perked up.
Data on Friday (Jul 15) is expected to show gross domestic product (GDP) grew 1 per cent in April to June from a year earlier, a Reuters poll showed, slowing from the first quarter’s 4.8 per cent pace.
The expected growth would be the weakest since a steep 6.9 per cent slump in the first quarter of 2020, when an outbreak of COVID-19 in the central city of Wuhan, first detected in late 2019, turned into a full blown epidemic.
On a quarterly basis, GDP is forecast to have contracted 1.5 per cent in the second quarter, versus growth of 1.3 per cent in January to March, the poll showed.
“The worst of the downturn is over. But recovery in the second half is unlikely to be too strong,” Nathan Chow, senior economist at DBS Bank in Singapore, said in a note.
“Anemic consumption remains the most daunting challenge owing to labor market strains because sporadic lockdowns have resulted in pay cuts and a hiring freeze.”
The government is due to release second quarter GDP data, along with June activity data, on Friday at 2am GMT (10am Singapore time).
Data released for June so far point to a bumpy road ahead for the economy, with exports rebounding with the lifting of COVID-19 lockdowns but a sharp slowdown in imports signalling tepid domestic demand.
Some smaller Chinese cities have had to impose COVID-19 lockdowns in recent weeks amid sporadic virus flare-ups, while the property market remains weak and the global outlook is darkening.
Still, activity data for June is expected to show some improvement, as the government has rolled out a raft of policy measures, cutting taxes for businesses and channeling more money into big-ticket infrastructure projects.
Industrial output likely grew 4.1 per cent in June from a year earlier, picking up from 0.7 per cent in May, while retail sales, a gauge of consumption which has been lagging since COVID-19 first hit, likely levelled off in June after falling 6.7 per cent in May.
Fixed-asset investment may have expanded 6.0 per cent in the first half, easing from 6.2 per cent in the first five months, even as the government ramps up infrastructure spending to drive growth.
Full or partial lockdowns were imposed in major Chinese cities from March through May, including the financial and commerce hub of Shanghai.
The Reuters poll forecast China’s growth to slow to 4.0 per cent in 2022, far below the official growth target of around 5.5 per cent.
The central bank on Wednesday pledged to keep liquidity reasonably ample and lower funding costs, foreseeing a temporary rise in the overall level of debt amid efforts to revive the economy.
Analysts believe room for the central bank to ease policy further could be limited by worries about capital outflows, as the US Federal Reserve aggressively raises interest rates to fight soaring inflation.
China’s rising consumer prices, while not as hot as elsewhere, also may add to constraints on monetary policy easing. Many analysts expect consumer inflation to pick up and surpass 3 per cent in the coming months, but the whole year average level will still be within the annual target of around 3 per cent.
“China’s recovery will likely continue amid global recession fears but inflation may increasingly become a source of concern. Without an imminent exit from zero-COVID, infrastructure investment will likely act as a key growth driver,” analysts at Citi said.
Source: Reuters/fh
