China’s economy shrinks sharply in Q2, global risks darken outlook & More Latest News

People look right into a window of a store, exterior a mall in Beijing, China, July 13, 2022. REUTERS/Thomas Peter

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  • China’s economy sinks in Q2, Y/Y progress additionally slows considerably
  • Widespread COVID lockdowns hammer industrial exercise, demand
  • June exhibits bounce in exercise, however global risks darken outlook
  • Fresh COVID flare-ups, Ukraine War, global price hikes heap stress
  • Analysts count on full 12 months GDP progress to lag govt goal of 5.5%

BEIJING, July 15 (Reuters) – China’s economy contracted sharply in the second quarter, highlighting the colossal toll on exercise from widespread COVID lockdowns and pointing to persistent stress over coming months from a darkening global progress outlook.

Friday’s information comes at a time of fears of a global recession as policymakers jack up rates of interest to curb hovering inflation, heaping extra hardship on shoppers and companies worldwide as they grapple with challenges from the Ukraine conflict and provide chain disruptions.

Gross home product fell 2.6% in the second quarter from the earlier quarter, official information confirmed, in contrast with expectations for a 1.5% decline and a revised 1.4% acquire in the earlier quarter.

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On a year-on-year foundation, GDP in the April-June quarter grew a tepid 0.4%, lacking forecast of a 1.0% acquire, in accordance with a Reuters ballot of analysts, a pointy slowdown from 4.8% in the primary quarter.

For the primary half of the 12 months, GDP grew 2.5%, effectively beneath the federal government’s goal of round 5.5% progress for this 12 months.

“China’s economy has stood on the edge of falling into stagflation, although the worst is over as of the May-June period. You can rule out the possibility of a recession, or two straight quarters of contraction,” stated Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.

“Given the tame growth, China’s government is likely to deploy economic stimulus measures from now on to rev up its flagging growth, but hurdles are high for PBOC to cut interest rates further as it would fan inflation which has been kept relatively low at present.”

Full or partial lockdowns have been imposed in main centres throughout the nation in March and April, together with the industrial capital Shanghai, which noticed a year-on-year contraction of 13.7% in GDP final quarter.

While a lot of these curbs have since been lifted, and June information supplied indicators of enchancment, analysts don’t count on a speedy financial restoration. China is sticking to its powerful zero-COVID coverage amid recent flare-ups, the nation’s property market is in a deep hunch and the global outlook is darkening.

The imposition of latest lockdowns in some cities and the arrival of the highly-contagious BA.5 variant have heightened considerations amongst companies and shoppers a few extended interval of uncertainty. learn extra

BOUNCE IN JUNE TEMPORARY?

Analysts imagine room for the central financial institution to ease coverage additional might be restricted by worries about capital outflows, because the U.S. Federal Reserve, and different economies, aggressively raises rates of interest to combat hovering inflation. learn extra

China’s rising shopper costs, whereas not as scorching as elsewhere, additionally might add to constraints on financial coverage easing.

A Reuters ballot forecast China’s progress to sluggish to 4.0% in 2022, far beneath the official progress goal of round 5.5%.

Data on June exercise, additionally launched Friday, confirmed that China’s industrial output grew 3.9% in June from a 12 months earlier, quickening from a 0.7% rise in May, though beneath a 4.1% improve forecast in a Reuters ballot.

Retail gross sales, alternatively, rose 3.1% from a 12 months in the past in June and marked the quickest progress in 4 months, after authorities lifted a two-month lockdown in Shanghai. Analysts had anticipated a 0% improve after May’s 6.7% drop.

“Retail growth indicates that lockdowns have been the primary drag on consumption, with demand clearly rebounding once Shanghai and other major cities emerged from lockdowns at the end of May,” stated Jacob Cooke, CEO of WPIC Marketing + Technologies, in Beijing.

“Consumers are still harbouring some uncertainty about lockdowns, but with indications that future lockdowns won’t be as strict, we’re optimistic that consumption will continue to recover in H2.”

Fixed asset-investment grew 6.1% in the primary six months of the 12 months from the identical interval a 12 months earlier, versus a forecast 6.0% rise and down from a 6.2% bounce in January-May.

The employment scenario remained fragile, with the nationwide survey-based jobless price falling to five.5% in June from 5.9% in May because the economy rebounded. However, youth unemployment stood at a report of 19.3% in June, greater than 18.4% in May.

A shaky restoration in China’s capital-starved property sector is being pressured additional by a rising variety of homebuyers throughout the nation halting mortgage funds till builders resume building of pre-sold properties.

Data on Friday confirmed that dwelling costs fell 0.5% from a 12 months in the past, worsening from a 0.1% dip in the earlier month, whereas progress on a month-to-month foundation additionally failed to select up. learn extra

Property funding fell 9.4% in June, worsening from a 7.8% decline in May, whereas property gross sales prolonged their declines by one other 18.3% final month, Reuters calculations confirmed.

“Even with some massaging of the figures, it’s hard to see how the government’s target of “around 5.5%” growth this year can be attained,” analysts at Capital Economics stated.

“That would take a huge acceleration in the second half of this year, which is unlikely.”

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Reporting by Kevin Yao, Stella Qiu and Ellen Zhang
Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.



 

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