Future Publishing | Future Publishing | Getty Images BEIJING — China posted GDP growth of 0.4 percent in the second quarter from a year earlier, missing expectations as the economy struggled to shake off the impact of Covid controls. Analysts polled by Reuters had forecast 1 percent growth in the second quarter. Industrial production in June also missed expectations, rising 3.9% from a year earlier, versus the forecast of 4.1%. However, retail sales in June rose 3.1%, recovering from a previous slump and beating expectations for no growth from a year earlier. Major e-commerce companies held a promotional shopping festival in the middle of last month. Retail sales in June were boosted by spending in several categories, including autos, cosmetics and drugs. But catering, furniture and building materials showed a decline. Within retail sales, online sales of physical goods rose 8.3% from a year ago in June, slower than the 14% increase in the previous month. Fixed asset investment for the first half of the year beat expectations, rising 6.1% versus the 6% forecast. Total investment in fixed assets rose on a monthly basis, rising 0.95% in June from May to an unknown rate. While investment in infrastructure and manufacturing maintained a similar or better pace of growth from May to June, the pace of growth in real estate deteriorated. Property investment in the first half of the year fell 5.4% from a year earlier, worse than a 4% drop in the first five months of the year. Unemployment in China’s 31 biggest cities fell from pre-pandemic highs to 5.8 percent in June, but for the 16- to 24-year-old age group it rose further to 19.3 percent.
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The statistics office described the latest economic results as “hard-earned achievements” but warned of the “protracted” impact of Covid and “shrinking demand” at home. The bureau also noted the growing “risk of stagflation in the global economy” and the tightening of monetary policy abroad. In the second quarter, mainland China faced its worst Covid outbreak since the peak of the pandemic in early 2020. Strict stay-at-home orders have plagued the metropolis of Shanghai for about two months, while travel restrictions have contributed to supply chain disruptions. By early June, Shanghai, Beijing and other parts of China were on track to resume normal business. In recent weeks, the central government has reduced quarantine times and relaxed some Covid prevention measures. However, parts of China have had to reintroduce Covid controls as new cases rise. As of Monday, Nomura said regions accounting for 25.5 percent of China’s GDP were under some form of lockdown or heightened scrutiny. That’s up from 14.9% a week earlier. Major investment banks have repeatedly cut their full-year GDP targets for China due to the impact of Covid controls. Among companies tracked by CNBC, the median forecast was 3.4% at the end of June. The official GDP target of “around 5.5%” was announced in early March. This is breaking news. Check back for updates.
