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China reports 4.7% GDP growth in Q2, below expectations
Cars made in China wait to be loaded onto a ship for export at Yantai Port on July 12, 2024 in Shandong Province, China.
Vcg | Visual China Group | Getty Images
“We estimate that discretionary retail spending fell at the sharpest sequential pace since the Shanghai lockdowns in April 2022,” Louise Loo, chief economist at Oxford Economics, said in a note.
The firm now estimates China’s GDP growth in 2024 at 4.8%, up from 4.4% estimated in December 2023 for the following year.
Annual industrial output growth in June, however, beat expectations at 5.3%, compared with a Reuters estimate of 5%. High-tech manufacturing saw an 8.8% increase in value added in June.
Urban fixed asset investment in the first six months of the year rose 3.9%, meeting expectations. Infrastructure and manufacturing investment slowed on an annual basis in June versus May, while real estate investment fell at the same rate of 10.1%.
Housing-related wealth in China will rise 2.2% in 2023, a sharp decline from the average annual pace of 13% between 2016 and 2021, Oxford Economics said in late May.
“We need to work harder to reinvigorate the market and stimulate domestic momentum,” the department said in an English-language press release.
He also called for efforts to “consolidate and reinforce the momentum of economic recovery and growth, so as to ensure the sustained and solid development of the economy.”
The urban unemployment rate in June was unchanged from the previous month at 5%, the bureau said. The unemployment rate for people ages 16 to 24 who are not in school typically comes out a few days after the overall number. The latest available data showed the youth unemployment rate remained high, at 14.2% in May.
In the first half of the year, the average per capita disposable income of city residents was 27,561 yuan ($3,801), a nominal increase of 4.6 percent from a year earlier, the data showed.
Rural disposable income grew at a faster pace, 6.8 percent in nominal terms, but at 11,272 yuan, it was less than half that of urban residents.
The National Bureau of Statistics did not hold a press conference to release the data. Separately, China’s high-level policy meeting, the Third Plenary Session, starts on Monday.
Bruce Pang, chief economist and head of research for Greater China at JLL, said he was eager to see how the plenary meeting could boost confidence and stabilize expectations.
More work will be needed for China to meet its growth target of around 5 percent because the economy grew only 5 percent in the first half, and growth in the second half is likely to be slower, he said.
China’s GDP grew 5.3% year-on-year in the first quarter in real terms.
In nominal terms, GDP grew 3.97% in the first quarter and 4.01% in the first half of the year, according to data accessed via Wind Information.
China’s exports as a growth engine have held up better than expected, but there is uncertainty about the future due to trade tensions, said Xu Hongcai, deputy director of the Economic Policy Commission of the China Political Science Association.
He said China could increase its fiscal support and ease monetary policy in the second half of the year.
China’s exports rose a more-than-expected 8.6 percent year-on-year, customs data released Friday showed. But imports fell 2.3% year-on-year in June, missing expectations for slight growth.
Retail sales in the first six months of the year rose 3.7%, with online sales of physical goods increasing 8.8%. Service sector sales increased 7.5%.
Sales of communications equipment, sporting goods and other entertainment items, as well as alcohol and tobacco, rose more than 10%. Sales of grains, oil and food products jumped 9.6%.
In June, the sports category saw its sales fall 1.5% compared to the previous year, while those of alcohol, tobacco and communication equipment saw an increase.
Sales of cosmetic products fell 14.6% year-on-year in June, making it the worst-performing category.
Sales of buffet services increased by 5.4% in June compared to the previous year, which represents a growth of 7.9% in the first half of the year.
Other measures also pointed to weak domestic demand.
China’s consumer prices rose 0.2% in June, year over year, missing expectations. Core CPI, which excludes more volatile food and energy prices, rose 0.6% year over year in June, slightly slower than the 0.7% increase in the first six months of the year.
China’s credit data released on Friday showed a sharp drop in growth of broad money supply and new yuan loans in the first half of the year compared with the same period in 2023.
Household loans rose by 1.46 trillion yuan ($200 billion) in the first six months of the year, nearly half of the 2.8 trillion yuan in new loans to the category last year. according to the People’s Bank of China.
Loans to enterprises increased by 11 trillion yuan in the first half of the year, slightly lower than the 12.81 trillion yuan recorded in the same period last year.
“June’s money and credit data indicated that credit demand remained weak,” Goldman Sachs analysts said in a report on Friday. “Recent policy communication suggests that the PBOC continues to focus on improving monetary policy transmission and downplaying the importance of aggregate credit growth. Looking ahead, CNY and M2 new loan growth may gradually slow further.”