China’s National Bureau of Statistics revealed that the country’s GDP for the second quarter increased by 4.7% compared to the previous year, which was lower than the 5.1% growth predicted by a Reuters survey. Retail sales in June also failed to meet expectations, climbing only by 2% instead of the projected 3.3%.
Expert Louise Loo from Oxford Economics highlighted a significant decrease in discretionary retail spending following the Shanghai lockdowns in April 2022. The firm now forecasts China’s GDP growth for 2024 at 4.8%, up from the 4.4% forecasted in December 2023.
In a positive development, industrial production exceeded expectations in June, increasing by 5.3% year-on-year against the expected 5%. High-tech manufacturing witnessed a notable 8.8% rise in value added. Urban fixed asset investment for the first half of the year grew by 3.9%, following predictions, while infrastructure and manufacturing investments slowed down in June compared to May. Real estate investments continued to decrease steadily by 10.1%.
The Bureau emphasized the importance of boosting market vigor and internal drive to maintain steady economic growth. The urban unemployment rate held steady at 5% in June, with youth unemployment at 14.2% in May.
During the first six months of the year, average per capita disposable income for urban residents reached 27,561 yuan ($3,801), showing a nominal growth of 4.6% from the previous year. Rural disposable income grew faster at 6.8%, but the amount of 11,272 yuan remained less than half of urban residents’ income.
Despite missing certain economic targets, China’s exports outperformed expectations, rising by 8.6% year-on-year in June, while imports decreased by 2.3%, not meeting predictions. Retail sales for the first half of the year grew by 3.7%, with online physical goods sales up by 8.8% and services sector sales rising by 7.5%.
However, cosmetics sales witnessed a significant drop of 14.6% in June, becoming the weakest category. Conversely, catering sales grew by 5.4% in June and contributed to a 7.9% growth for the first half of the year.
Consumer prices in China increased by 0.2% year-on-year in June, which was lower than expectations, while core CPI grew by 0.6%, slightly below the 0.7% rise in the first half of the year. Credit demand remained weak, with new yuan loans and broad money supply growth declining significantly in the first half of the year compared to 2023.
Goldman Sachs analysts suggested that recent policy communications indicate the People’s Bank of China is prioritizing enhancing monetary policy transmission rather than overall credit growth. They anticipate a gradual slowdown in the growth of new yuan loans and M2.
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