BEIJING: China’s economy grew slightly more slowly than expected in the second quarter, weighed down by higher raw material costs and new Covid-19 outbreaks, as expectations build that policymakers may have to do more to support the recovery.
Gross domestic product (GDP) expanded 7.9 per cent in the April-June quarter from a year earlier, official data showed on Thursday, missing expectations for a rise of 8.1 per cent in a Reuters poll of economists, report agencies.Growth slowed significantly from a record 18.3 per cent expansion in the January-March period, when the year-on-year growth rate was heavily skewed by the Covid-induced slump in the first quarter of 2020.
Average second quarter growth in 2020 and 2021 was 5.5 per cent, compared to a 5 per cent average for the first quarter, according to the National Bureau of Statistics.
June activity data slowed from the month before but beat expectations.
“The numbers were marginally below our expectation and the market’s expectation (but) I think the momentum is fairly strong,” said Woei Chen Ho, an economist at United Overseas Bank in Singapore.
“Our greater concern is the uneven recovery that we’ve seen so far and for China the recovery in domestic consumption is very important ... retail sales this month was fairly strong and that may allay some concerns.”
While the world’s second-largest economy has rebounded strongly from the Covid-19 crisis, buoyed by solid export demand and policy support, data released in recent months has suggested some loss in momentum.Higher raw material costs, supply shortages and pollution controls are weighing on industrial activity, while small Covid-19 outbreaks have kept a lid on consumer spending.
Investors are watching to see if the central bank is shifting to an easier policy stance after the People’s Bank of China announced last week it would cut the amount of cash that banks must hold as reserves, just as some other central banks begin or start thinking about exiting pandemic-era stimulus.
On a quarterly basis, GDP expanded 1.3 per cent in the April-June period, the National Bureau of Statistics said, just beating expectations for a 1.2 per cent rise in the Reuters poll. The NBS revised down growth in the first quarter from the fourth quarter last year to 0.4 per cent.
The PBOC move, which released about 1 trillion yuan ($154.64 billion) in long-term liquidity to bolster the recovery, comes even as policymakers have sought to normalise policy after the economy’s strong rebound from the coronavirus crisis to contain financial risks.
It highlights the challenges policymakers will face in rolling back pandemic-era stimulus as the coronavirus continues to flare-up around the world.
“The domestic economic recovery is uneven,” said Liu Aihua, an official at the NBS at a briefing on Thursday.
“We must also see that the global epidemic continues to evolve, and there are many external instabilities and uncertain factors,” she said.